

Yield Curve
When long-term interest rates are higher than short-term rates, the “yield curve” is said to be normal. The reverse of that means the curve is inverted. The FED has manipulated interest rates to “regulate” the economy for, in their view, the proper relation between inflation and growth. This is of course why our founders made the creation of a central bank a treasonous offense. Economies must rise and fall on the basis of the habits and desires of the consumer.
Banks are loaning money to facilitate corporate take-overs at the fastest rate since 2006/2007. Corporate debt has ballooned as a consequence which puts corporations and banks at risk. Ten years ago corporations had $3.3 trillion in debt; today it has soared to $6.4 trillion. Corporations now have 45 cents in debt for every dollar of GDP.
Risky debt represents 75% of all debt, roughly eight times more since 2010. This high-risk behavior is common before major economic crisis. Low interest invites people to take huge risks and much of the risk falls on the economic system. Real estate investors are following lockstep with other borrowers to the point where affordability is as bad as it was in 2008. Debt for mergers and acquisitions are 23% higher than just a year ago.
Although food and fuel prices are reasonable, the price of many things are much above the the FED 2%/year inflation target. The money people spend in the economy was 10% from welfare sixty years ago; now it’s 35%. So basically expendable income derived from taxes on Peter to pay Paul have increased over three times whilst the income Peter makes (adjusted for inflation) has fallen dramatically.
Asset inflation has by far outpaced “consumable” inflation. From baseball cards to expensive homes, tangible hard assets have gone up in price three fold which reflects the view of many that paper assets are not as secure and permanent as we all hope. The FED chair has been exposed as the wizard behind the curtain and we, Dorthy, are wanting to tap our heels together and return to Kansas.
The problem we face is that a good share of the American public have grown accustomed to living in OZ. Their manipulated lives have become comfortable and they are unaware that the fool behind the curtain is becoming confused as to which “string” to pull. And returning to Kansas is simply unthinkable, even not American. Those of us wanting to head for Kansas are at best frustrated by the road we must take and at worst think it might well be a hopeless journey impeded by those OZ dwellers. Be that as it may, it may come as a surprise that we do have the fortitude of our ancestors and we will prevail because we, unlike the OZ people, have a vision for our future which is the preservation of our posterity.
Our government is at war with itself and therefore with the public it supposedly serves. The Democrats want the OZ party to continue and so they battle a president that is constantly trying to turn the American ship toward Kansas. Whether you place your faith in the man behind the curtain or the man wrestling with the crew manhandling the helm, it behooves us to prepare as best we can and not get mired in the blame game.
To those with eyes open, remember the goal is worth the fight. We must prevail for the sake of our children. Heaven will hold us accountable.