The Administration recently released its 2021 budget. Congress has yet to weigh in, but the proposed $6 trillion in government spending will raise the national debt to $31 trillion. This financial tsunami will be partially paid for with higher taxes on the wealthy and corporations. Those hurt by the pandemic will be helped, employment increased, and GDP revised upward.
Or not. There’s another factor that has been largely ignored: the US money supply continues to skyrocket at historic rates—just under 40 percent (YOY) in January and February 2021. One economist noted, “nothing like this has ever happened before.”
Treasury Secretary Yellen has told us “there’s nothing to worry about,” but clearly something is amiss: we’re already seeing soaring home prices; shortages in construction materials and semiconductor chips; and skilled labor despite widespread unemployment. Airlines and gas stations have jacked up fares and pump prices.
Having saved the world from itself over 60 years ago and put a man on the Moon 25 years later, Americans are a proud lot. But, time waits on no one. As the country's vaunted financial infrastructure reports over $400 billion in write-offs and credit dries up, the transportation infrastructure watches its airlines charge for carrying a suitcase while bridges collapse, and its social security infrastructure sinks slowly into the abyss of insolvency, dare we ask, “what's next”? Try energy. Meeting America's energy needs and moving toward a low carbon future look increasingly distant.
This article could as easily be about the financial or transportation infrastructure as it is about energy. Or education or healthcare or immigration. We're reasonably good at fixing specific problems, considerably less adept at developing policy over broader areas. The reasons are many but one is key: our central government has sought—and failed—to fix and do everything. Blame it on the media, personalities, or simply good intentions gone bad. But, debate, compromise and principled consensus have become ever more difficult in Washington. The end result is the country's real challenges remain unsolved.
Highly regarded within the field or bankruptcies and restructuring, Wilbur Ross is Chairman and CEO of W R Ross and Co. of New York. His successes include automotive, coal, and steel manufacturers. Now, Ross is focusing on the financial services sector.
At a recent conference, Ross provided a very sobering view of the financial black hole that American banks and consumers have dug for themselves.