Bank Problems Will Get Much Worse! ZIRP Coming Soon!
Former hedge fund manager and certified crazy guy, Hugh Hendry, was on Bloomberg yesterday.
Here are a few of Hendry’s points:
- Bank problems will get MUCH WORSE! Deposits will continue to drain out of banks because it is so easy now (with apps) and as depositors simply chase higher yields.
- Inflation was caused by supply shocks from COVID and not from “printing money” – so inflation will continue to abate.
- 10 and 30 Year Treasuries are the best investment right now because rates will fall so much.
- Our entire debt-plagued economy and our government are 100% dependent now on zero interest rate policy (ZIRP), so we will return to ZIRP.
I share this because Mr. Hendry is one more “non-tribal” analyst who is making the same points that Jeff Snider, Jim Bianco (another macro guy I follow), and Alf Peccatiello have all been making. Bianco, however, thinks inflation will return after bottoming in July.
“Jay, Are We Heading into a Total Economic Meltdown; A Repeat of the Great Depression?”
An excellent and extremely well-informed agent emailed me yesterday to ask me if we are heading into a depression, as Jeff Snider’s podcast was scaring the heck out of her.
And my answer was no for a variety of reasons. First of all, Mr. Snider always comes across as a bit too negative, so his info, while accurate, should be taken with a grain of salt.
In addition, we now know what caused the great depression, including: (1) very tight monetary policy; (2) a massive tariff act that shut down world trade; (3) tax increases at the worst possible time; (4) and a very heavy-handed regulatory environment.
NOTE: The 1929 stock market crash did not cause the great depression. America had seen many other similar crashes but had bounced back much faster because politicians did not overreact.
In any case, most politicians and economists now know what mistakes to avoid because of what we learned from the 1930s.
Over and above learning lessons, there is a reason Warren Buffett says to “never bet against America.”
There is also a reason why Brent Johnson is so convinced the U.S. dollar won’t collapse soon.
And those reasons all involve America’s many enormous advantages that no other country has.
Reasons for Optimism!
Michael Girdley shared this wonderful tweet thread last week, explaining why there is no chance America will stop being the global superpower, and why America will always be the best country for opportunity (despite ALL of our enormous problems).
He includes the usual arguments that Brent Johnson also shares when touting the dollar: (1) Democracy; (2) Rule of Law; (3) U.S. Dollar; (4) Military Strength; (5) Immigration; and (6) Entrepreneurial Culture.
BUT – the biggie is GEOGRAPHY! And he makes the same points that Peter Zeihan makes in his excellent book “The Accidental Superpower.”
Girdley points out that America is the only country to have grown every decade over the last 150 years, and our geography is the main reason why.
- Navigable Rivers and the Great Lakes. We have more navigable rivers and lakes than any other country, allowing us to transport goods much less expensively and to the oceans – and therefore, the world.
- Prime Farmland. No other country comes close to the U.S.
- Seaports/Barrier Islands/Huge Coastline. America has the most abundant harbor system in the world, much of it protected by barrier islands that keep the water very calm.
- Size Matters. The U.S. is the 4th largest country by area, behind Russia, Canada and China. BUT – we have by far the most high-quality land.
- Energy Reserves and Production. We’re the #1 producer and rank very high in reserves too.
- Ocean Currents. We just happen to be on the right side of the ocean currents, which greatly enhances our timber and ag production on all sides of the country.
- Canada and Mexico – Not So Much. They have too many mountains and jungles and/or too much tundra. They also have poor soil and are just too far north or south.
- Oceans = Giant Moats. The oceans on either side of us make invading the U.S. next to impossible.
- Northern Hemisphere. This is where the action is at because it has 2x more land than the southern hemisphere.
I highly recommend reading the full tweet thread for all of the info Mr. Girdley shares, as it is very interesting and encouraging. But, the above list is the gist.
More importantly, when people like Steve Forbes, Van Jones, Ken Fisher, and George Will express optimism about America’s future no matter how bad our problems seem, I suspect it is because they are well-aware of our many advantages and even more aware of the fact that we have overcome problems of much more severity many times.
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