Question Investing & Investments during crisis

[aema15]

I would rather boil my balls in oil than be a landlord in California.

Part of the reason I went into syndications as an LP, although that has its own set of hurdles and drawbacks.

 

[star.3d]

The problem I think I'm not seeing described in it is that the government's spending cycle will continue to grow regardless.

I'm not 100% sure I understand, so sorry if this first bit is pedantic... The government can't cut spending - I know they say that is what they're doing, but they're not actually. Take a look at the 'debt to the penny' chart from the Treasury below (link here); Federal spending has increased pace by ~100% over the past couple of months despite DOGE and other [illegal] RIF attempts. The Treasury will continue to sell bonds to cover these costs and push the Federal Reserve to lower overnight rates and print money by revaluing gold, forcing bond purchases to implement crypto, etc. Here's the 2025 budget breakdown (link) - Medicare, other healthcare spending, and social security (which is complicated because it has a designated tax revenue stream) make up approximately half of the total budget. It's not politically viable to cut social services spending, and so austerity is not possible. The ACA subsidies currently being debated in Congress constitute just $34B/yr out of a total of $980B/yr in non-Medicare healthcare spending. This is way way too small to meaningfully affect debt/GDP. Also, this spending goes back into the economy where it generates tax revenue... so cutting spending also has a negative impact on revenue and GDP growth, which is confusing AF.

I think you're suggesting that the government risks precipitating a fiscal crisis or debt spiral - the US economy is a cycle, but the Fed's role is to keep it under control. The Treasury sells bonds increasing the total debt burden and so interest takes a larger portion of the budget. But by forcing the Fed to print money, resulting in inflation, the Treasury expects to take in more tax revenue, which counteracts the increasing interest. What the Treasury wants to do - and has done in the past - is achieve economic repression whereby inflation outpaces real yields on treasuries, effectively pushing the federal debt onto the economy as a whole "without raising taxes" (it achieves the same thing without being called a tax). This is supposed to happen without collusion between the Fed and Treasury. If inflation gets too high, bond holders will demand higher interest rates or flee the dollar altogether. Some institutions like banks and crypto companies will be forced to hold Treasuries. Currently, the Fed only sets the overnight interest rate, but in more sever instability, they could implement yield curve control and buy unlimited amounts of bonds to force longer-term interest rates lower in order to stabilize the economy.

I don't personally trust Scott Bessent - failed hedge fund manager - to manage the federal debt responsibly. And if Trump et al stack the Federal Reserve Board of Governors, it will do a ton of damage to the dollar's reputation. But will the dollar collapse? I don't think so. Will the wealth gap widen? Yes, absolutely.

 

[couragewolf]

I'm not 100% sure I understand, so sorry if this first bit is pedantic... The government can't cut spending - I know they say that is what they're doing, but they're not actually. Take a look at the 'debt to the penny' chart from the Treasury below (link here); Federal spending has increased pace by ~100% over the past couple of months despite DOGE and other [illegal] RIF attempts. The Treasury will continue to sell bonds to cover these costs and push the Federal Reserve to lower overnight rates and print money by revaluing gold, forcing bond purchases to implement crypto, etc. Here's the 2025 budget breakdown (link) - Medicare, other healthcare spending, and social security (which is complicated because it has a designated tax revenue stream) make up approximately half of the total budget. It's not politically viable to cut social services spending, and so austerity is not possible. The ACA subsidies currently being debated in Congress constitute just $34B/yr out of a total of $980B/yr in non-Medicare healthcare spending. This is way way too small to meaningfully affect debt/GDP. Also, this spending goes back into the economy where it generates tax revenue... so cutting spending also has a negative impact on revenue and GDP growth, which is confusing AF.

I think you're suggesting that the government risks precipitating a fiscal crisis or debt spiral - the US economy is a cycle, but the Fed's role is to keep it under control. The Treasury sells bonds increasing the total debt burden and so interest takes a larger portion of the budget. But by forcing the Fed to print money, resulting in inflation, the Treasury expects to take in more tax revenue, which counteracts the increasing interest. What the Treasury wants to do - and has done in the past - is achieve economic repression whereby inflation outpaces real yields on treasuries, effectively pushing the federal debt onto the economy as a whole "without raising taxes" (it achieves the same thing without being called a tax). This is supposed to happen without collusion between the Fed and Treasury. If inflation gets too high, bond holders will demand higher interest rates or flee the dollar altogether. Some institutions like banks and crypto companies will be forced to hold Treasuries. Currently, the Fed only sets the overnight interest rate, but in more sever instability, they could implement yield curve control and buy unlimited amounts of bonds to force longer-term interest rates lower in order to stabilize the economy.

I don't personally trust Scott Bessent - failed hedge fund manager - to manage the federal debt responsibly. And if Trump et al stack the Federal Reserve Board of Governors, it will do a ton of damage to the dollar's reputation. But will the dollar collapse? I don't think so. Will the wealth gap widen? Yes, absolutely.

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The government can cut spending, but they WILL not. Those are two different things.

The problem is that the government spending requires balance sheet extension and balance sheet extension then inevitably devalues the dollar relative to the goods dollar holders buy with it. Therefore the value in holding dollars as a stable against volatility and an issolated trade settlement/collateral device are ALSO devalued.

That means the process of dislocations of dollar trade internationally are in fact INCENTIVIZED and trade finds other routes.

They intend to restructure trade deficits but noone seems to be asking "at what cost" or what the quality of life for the average american looks like on the other end of that deal I think you clearly can visualize the outcome. This is being sold to people as something being done in their benefit but in reality when you describe the wealth gap you're talking specifically about the concentration of money. Hence the rich will get far richer and people who think they are middle class will soon find themselves poor.

None of the fiscal damages matter so long as retired police and firefighters are getting pension paychecks or active duty can survive on their meager checks, but you're entering the uncomfortable zone where those entitlements get squeezed to the point of breaking social contracts and that's going to be something printing more dollars can't fix.

 

[couragewolf]

It's a flywheel in the sense that you can print to inflate things but when you inflate things stuff gets more expensive and wages don't follow, so the question is how far can you continue inflating things telling people it's helping them when clearly it is not and expect people not to do something about it.

You can make working for the government the only job that pays enough to keep government employees quiet, or enforcing the edicts, but what about everyone else?

 

[rooftopkorean]

AI's been going CRAZY.

 

[star.3d]

The government can cut spending, but they WILL not. Those are two different things.

Well... I disagree - symbolically cutting spending is useless, and deep cuts aren't a good idea. In a macroeconomic sense, inflation and devaluation of the dollar is completely normal, even if painful for consumers. The federal government cannot balance the budget - it's both not possible and not desirable. Most of this administration's fiscal policies are increasing the budget deficit, which is not ideal either. The goal is not to pay down the federal debt... that would actually make things worse because it'd fundamentally be quantitative tightening and risks recession. Federal debt and federal economic policy aren't like personal debt and personal spending, because the government's bond buying and selling are the controls on the money supply; there's no real corollary in personal finance. If there was no federal debt, they would have no handles by which to control the economy.

At some level, the "economy" is an apparatus that the government uses to force people to work - which is depressing. But it has also allowed America to enjoy a higher standard of living compared to most of the world - which is good. The government's debt is - in part - used to buy our higher standard of living. It's a lousy proposition to ask Americans to give up the social safety net, which was largely implemented by Roosevelt to help us plebeians out of The Depression, because all it will do is enrich those at the top.

 

[couragewolf]

Well... I disagree - symbolically cutting spending is useless, and deep cuts aren't a good idea. In a macroeconomic sense, inflation and devaluation of the dollar is completely normal, even if painful for consumers. The federal government cannot balance the budget - it's both not possible and not desirable. Most of this administration's fiscal policies are increasing the budget deficit, which is not ideal either. The goal is not to pay down the federal debt... that would actually make things worse because it'd fundamentally be quantitative tightening and risks recession. Federal debt and federal economic policy aren't like personal debt and personal spending, because the government's bond buying and selling are the controls on the money supply; there's no real corollary in personal finance. If there was no federal debt, they would have no handles by which to control the economy.

At some level, the "economy" is an apparatus that the government uses to force people to work - which is depressing. But it has also allowed America to enjoy a higher standard of living compared to most of the world - which is good. The government's debt is - in part - used to buy our higher standard of living. It's a lousy proposition to ask Americans to give up the social safety net, which was largely implemented by Roosevelt to help us plebeians out of The Depression, because all it will do is enrich those at the top.

Answer me this, what happens if a treasury auction doesn’t succeed and no one buys the treasuries?

 

[star.3d]

...if a treasury auction doesn’t succeed and no one buys the treasuries?

I don't think that's a plausible scenario, and we're definitely not there today. The main reason is that US bondholders are a pretty diverse group; 78% of the federal debt is held domestically, and the US still has an excellent credit rating and highly transparent central bank (for now!) compared to other countries around the world. The government itself is the largest bondholder (36%, including the Fed). Consider Social Security, for example - these moneys are 'invested' in two designated funds that primarily buy US treasuries, and this won't change (unless Trump succeeds in 'privatizing' SS so the funds buy securities instead). China only holds like 0.2% of the debt.

The Treasury is currently buying back treasuries to maintain liquidity, but that's different than a fiscal crisis or default. The Treasury is buying its own debt to prop up bond sales - and it'll save money by rolling over long bonds into short-term treasuries.

So your question is in essence "what happens if America stop buying America's debt"... The debt will be bought, at some interest rate. Some buyers (like banks, crypto) will be forced to buy, some will continue to be foreign investors seeking safer storage of wealth, and others will be private individuals who don't know their 401(k) and money market account indirectly hold Treasury bonds.

 

[H. Bowman]

Answer me this, what happens if a treasury auction doesn’t succeed and no one buys the treasuries?

Then the 20k I keep there for a little side pot of emergency fund will be gone, and it will be the least of my worries because things will be far worse than that ultra depreciated 20 grand could help with anyway.

 

[couragewolf]

I don't think that's a plausible scenario, and we're definitely not there today. The main reason is that US bondholders are a pretty diverse group; 78% of the federal debt is held domestically, and the US still has an excellent credit rating and highly transparent central bank (for now!) compared to other countries around the world. The government itself is the largest bondholder (36%, including the Fed). Consider Social Security, for example - these moneys are 'invested' in two designated funds that primarily buy US treasuries, and this won't change (unless Trump succeeds in 'privatizing' SS so the funds buy securities instead). China only holds like 0.2% of the debt.

The Treasury is currently buying back treasuries to maintain liquidity, but that's different than a fiscal crisis or default. The Treasury is buying its own debt to prop up bond sales - and it'll save money by rolling over long bonds into short-term treasuries.

So your question is in essence "what happens if America stop buying America's debt"... The debt will be bought, at some interest rate. Some buyers (like banks, crypto) will be forced to buy, some will continue to be foreign investors seeking safer storage of wealth, and others will be private individuals who don't know their 401(k) and money market account indirectly hold Treasury bonds.

What’s interesting here is you acknowledge that it can’t occur this way forever, but you seem to think the inevitable turn over will happen when there’s something more attractive than the present regime. I assume the indicators you would observe to recognize when treasuries are no longer the safe haven are:

- deflationary GDP signals in spite of easing functions from the fed
- repatriation of foreign dollar holders to domestic currencies
- trade agreements being settled outside of dollar collateral
- consumer spending headwinds
- liquidity backpressure signals
- bank level collateral validation issues

If you saw all of these things, would you then start to consider the possibility that what I'm saying has become a relevant economic forcing function that will then FORCE the government to spend less or risk civil disorder due to runaway inflation that they can no longer control?

I'm not saying that what you're saying is wrong. It's all true. The less the government spends the less the economy is subsidized the less jobs there are etc.

I'm saying either the jobs program ends, or entitlements that were designed structurally to continue on a basis of 2x-3x relative forecasts to actual GDP are basically dishonored. Rule of law as it comes to property rights can no longer be trusted. There's certainly a point where we print so much money that we inflate away everyone's savings and the value of these pensioners checks.

 

[couragewolf]

Then the 20k I keep there for a little side pot of emergency fund will be gone, and it will be the least of my worries because things will be far worse than that ultra depreciated 20 grand could help with anyway.

Everyone in America seems to have this perspective that the end of the American empire is the end of the world, but honestly I don't see it this way.

I don't expect it to be fun but England was once the reserve currency, and while they had a couple of rough decades it's not the worst place in the world right now.

This is just another blip in the human roadmap as we trend towards more sustainable economics.

 

[star.3d]

Don't get me wrong - I'm not saying America's economic future is bright. What I am saying is that the American economy is still among the strongest in the world and it is going to take a lot more than a low-IQ president to break it. The dollar is, today, still a safe haven relative to many other countries, and we will see multiple credit rating cuts before the bond market is in crisis. I genuinely believe the Treasury is going to engineer (by financial repression) a means of achieving their goals in the immediate term (2-3yrs?).

- deflationary GDP signals in spite of easing functions from the fed
This is stagflation - we're still at a risk of this. I don't think this administration cares.
- repatriation of foreign dollar holders to domestic currencies
This is mostly foreign central banks moving from dollars to gold right now, not other fiat currencies. I think a lot of gold investors don't understand who is buying (and moving the price of) the world's gold.
- trade agreements being settled outside of dollar collateral
The US government would be betraying us to do this. But I agree, losing the world reserve currency status would be devastating for US markets. That's fundamentally why I oppose Trump's nationalist policies. Turning inward ('America first') sounds good, but nationalism is bad fiscal policy (China agreed in 1978)
- consumer spending headwinds
That's already here and could contribute to stagflation, but I don't see this as an existential risk for the dollar. Reduced spending is deflationary, but Americans endured much higher inflation in the 1970s-80s, and this didn't precipitate widespread civil unrest. Is anyone out protesting cost of living right now? Not really - it's mostly political protest.
- liquidity backpressure signals
- bank level collateral validation issues
Auto and short-term loans are the next Bear-Stearns. Haven't seen banks fail yet, but yes this would be a warning sign.

There's certainly a point where we print so much money that we inflate away everyone's savings and the value of these pensioners checks.

Yes! They're accelerating the drop-dead date for Social Security, and I fully expect the wealth gap to widen. In an extreme scenario, low- to middle-income Americans will fall into poverty, life expectancy will fall again, and civil unrest or violence will rise.

 

[star.3d]

Here's another interesting visual of historical allocations at global central banks. I think the dollar could cede a lot of ground before any sort of collapse.

 

[couragewolf]

Here's another interesting visual of historical allocations at global central banks. I think the dollar could cede a lot of ground before any sort of collapse.

View attachment 105578

I think we're 100% in alignment on everything but what constitutes a tipping point and how forcing functions work with cyclical feedback loops.

Everything you've said is factually correct, but what it doesn't account for is that charts like global reserves don't tell you just VOL they show you trend reversals.

The trend reversal of increases in gold and decreases in USD in that chart don't shout to me "look at how wide the surface area of dollar volume is" they shout very loudly to me " look at how such a strongly established trend is RAPIDLY changing".

Now look at the velocity on gold volume reduction relative to the dollar increase and map yourself another 20 years on the chart?

I would also consider that from Marks and Francs to Euro's effectively were a complete coup by dollars Euros on this chart might as well be dollars.



All of these things don't matter, UNTIL they REALLY MATTER and then when they start to change they change VERY quickly. So quickly that people can't keep up and significant legal changes to the entire normal have to occur.

When the US government started bailing out banks something sort of permanently changed in my opinion, but what noone is afraid of anymore is what the wall to their capability of doing that actually is. Noone seems to appreciate that the risk of bank bailouts NOW is in the trillions and the accounts available to do that are only in the hundreds of billions. Trump stretching the repo market almost a trillion dollars before burning another 6 trillion on scams during the pandemic was the canary in the coal mine for what's coming in liquidity and credit markets.

The US market pre covid was on a crash course with financial reality, and they printed 6 trillion dollars and gave it out like candy to prevent this. You saw a significant uplift in inflationary pressures and peoples real value measures decline pretty significantly as a result but that back pressure still exists.

Now you're about to experience the same thing only no pandemic to excuse it and the printing will be a permanent fixture as will the inflationary results. Job declines are going to ramp significantly even as things get even more expensive so there's no outcome that doesn't result in people running wild in the streets.

Of course many of the people here have been perfectly primed to accept ramping up a surveillance and prison state that would make even china blush as a normal constitutional american thing to do because of whatever cultural hangups they have.

Frankly, don't see it ending well for the dollar. I'm offshoring assets personally not betting on how successful this venture will be. I'm actively working with people who are building entire businesses on the model of capturing wealth flight from the US market right now. Europeans that previously have heavily invested in the US markets are repatriating capital as are AIPAC orgs.

The US economy is no longer the safe reliable bet it previously was. My prediction is after the draconian surveillance era (probably a solid decade of strife) what will be left is the kind of place people holding more valuable assets see as a cheap place to retire where their money goes further than it does in their home country.

My bets are on India rather than China to seize the reigns here. People don't see it coming but the demographics tell the story imo.

 

[H. Bowman]

I think we're 100% in alignment on everything but what constitutes a tipping point and how forcing functions work with cyclical feedback loops.

Everything you've said is factually correct, but what it doesn't account for is that charts like global reserves don't tell you just VOL they show you trend reversals.

The trend reversal of increases in gold and decreases in USD in that chart don't shout to me "look at how wide the surface area of dollar volume is" they shout very loudly to me " look at how such a strongly established trend is RAPIDLY changing".

Now look at the velocity on gold volume reduction relative to the dollar increase and map yourself another 20 years on the chart?

I would also consider that from Marks and Francs to Euro's effectively were a complete coup by dollars Euros on this chart might as well be dollars.



All of these things don't matter, UNTIL they REALLY MATTER and then when they start to change they change VERY quickly. So quickly that people can't keep up and significant legal changes to the entire normal have to occur.

When the US government started bailing out banks something sort of permanently changed in my opinion, but what noone is afraid of anymore is what the wall to their capability of doing that actually is. Noone seems to appreciate that the risk of bank bailouts NOW is in the trillions and the accounts available to do that are only in the hundreds of billions. Trump stretching the repo market almost a trillion dollars before burning another 6 trillion on scams during the pandemic was the canary in the coal mine for what's coming in liquidity and credit markets.

The US market pre covid was on a crash course with financial reality, and they printed 6 trillion dollars and gave it out like candy to prevent this. You saw a significant uplift in inflationary pressures and peoples real value measures decline pretty significantly as a result but that back pressure still exists.

Now you're about to experience the same thing only no pandemic to excuse it and the printing will be a permanent fixture as will the inflationary results. Job declines are going to ramp significantly even as things get even more expensive so there's no outcome that doesn't result in people running wild in the streets.

Of course many of the people here have been perfectly primed to accept ramping up a surveillance and prison state that would make even china blush as a normal constitutional american thing to do because of whatever cultural hangups they have.

Frankly, don't see it ending well for the dollar. I'm offshoring assets personally not betting on how successful this venture will be. I'm actively working with people who are building entire businesses on the model of capturing wealth flight from the US market right now. Europeans that previously have heavily invested in the US markets are repatriating capital as are AIPAC orgs.

The US economy is no longer the safe reliable bet it previously was. My prediction is after the draconian surveillance era (probably a solid decade of strife) what will be left is the kind of place people holding more valuable assets see as a cheap place to retire where their money goes further than it does in their home country.

My bets are on India rather than China to seize the reigns here. People don't see it coming but the demographics tell the story imo.

That all sounds almost exactly like everything I've heard and read people say since the 70s.

 

[couragewolf]

That all sounds almost exactly like everything I've heard and read people say since the 70s.

Did they print 6 trillion dollars between 1970 and 1990 like they did in 9 months of the first Trump presidency?

 

[couragewolf]

Here's another interesting visual of historical allocations at global central banks. I think the dollar could cede a lot of ground before any sort of collapse.

View attachment 105578

This is an interesting take:

Hedge funds registered in the Cayman islands are reported to have a 1.8 Trillion dollar reconciliation gap at present

 

[ikeo1]

That all sounds almost exactly like everything I've heard and read people say since the 70s.

History does have a tendency to repeat itself if you don't learn from the mistakes or if you think they weren't mistakes.

Prepare accordingly... Stocks are up but buying power is down.. Please don't tell me you think inflation stopped and prices are going down on everything.

 

[H. Bowman]

Prices will never go down.

But sensationalism for the sake of sensationalism is kind of silly too.

 

[ikeo1]

Prices will never go down.

But sensationalism for the sake of sensationalism is kind of silly too.

It’s not that sensational for the people that lose money from these swings. Ironically, the sensationalism is what’s driving our nation now. We’ve gone through several market crashes already. Not everyone makes it out on top, after each iteration/crash the class disparity gets wider, if you’ve noticed. The people with money already are able to take advantage those that don’t have to recover.

These days markets are go up or down based on some tweets. Plus people believe that prices have come down because that’s what they’ve been told.