In this extensive presentation by Matterhorn Asset Management partner, Matthew Piepenburg, we separate the iconic America from the current and debt-soaked America to better prepare investors with facts and figures rather than platitudes and nostalgia.
Piepenburg opens with a sober look at US debt to GDP and Debt to Tax Receipts data to underscore the increasingly unsustainable profile of US debt levels and the increasingly ineffective solution of paying for that debt with “mouse-click” money.
Piepenburg addresses the four turning points which placed America in this openly absurd situation. He then turns toward current, yet failed, policies to save a central bank and US system now trapped between a rock and a hard place…
Debt levels monetized with fiat money are naturally inflationary. But now Powell is “fighting” this inflation with rising rates—which are dis-inflationary. Piepenburg explains how such temporary measures are ultimately inflationary, despite desperate attempts in DC to claim a slow victory over inflation. In the meantime, Piepenburg gives example after example of the hard rather than soft consequences of Powell’s “war on inflation,” which he compares to Napoleon’s march on Moscow—that is: You win a battle but lose the war.
In the end, and despite dis-inflationary (and even deflationary market corrections), the end-game for an America with increasingly unloved bonds and increasingly distrusted dollars is more central bank liquidity—which by definition is inflationary. Of course, gold is then discussed as history’s most obvious answer to this equally historical debt and currency trap.
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