Dear Reader,
The Fed Chair stood tall. Spoke smooth. Everything’s awesome, right? Labor market’s “strong.” Inflation’s “coming down.” They’re “confident” about the future.
But then, someone had the nerve to ask the obvious: If the economy’s so good, why cut interest rates by 50 basis points?
A rate cut—when everything’s fine? Doesn’t add up.
- The Fed claims the US economy is strong, yet they’re slashing interest rates—an odd move usually reserved for weak economies.
- Inflation is far from over, with factors like temporary drops in used car prices masking the real issue.
- The real reason for rate cuts: The government can’t afford to pay high interest on its massive $35 trillion debt, driving a dangerous cycle of borrowing and inflation.
The Obvious Paradox: Why Cut Rates If Everything’s Great?
The truth? Central banks only pull that lever when things are shaky. And now? They’re cutting rates like there’s no tomorrow. So, which is it? Is the economy thriving or on the brink? They say it’s both.
Does that make sense? Of course not. But they want us to believe it anyway.
A few brave reporters didn’t buy it. One asked, why are they planning more rate cuts if the economy’s “so great”? If they’re cutting just to keep unemployment from rising, maybe—just maybe—the economy isn’t as healthy as they’re saying.
The Labor Market Distraction: What They’re Not Telling You
Still, the Chair wouldn’t budge. He doubled down, insisting everything’s solid, like a politician who never admits a mistake. But there was one glaring omission in the discussion—inflation.
It’s as if they’ve cast a spell to make us forget the sky-high inflation we’ve endured. Yesterday’s narrative was all about jobs, while inflation was waved off like an old ghost. But let’s be real. The Fed knows inflation isn’t done. Far from it.
The last Consumer Price Index report showed prices up 2.5% over the past year. Strip out food and fuel, and “core” inflation was still 3.2%. But here’s the kicker: that drop in the average was thanks to one thing—used car prices.
Yeah, those insane used car prices from the pandemic? They’ve finally dropped, by about 10%. That dip dragged the whole inflation average down.
The Inflation Mirage: Why the Drop in Used Car Prices Won’t Last
But guess what? It’s a temporary blip. Used car prices won’t keep falling forever. When they level off, the inflation average shoots back up. That’s just short-term. Long-term? We’re looking at multi-trillion-dollar deficits fueling inflation like gasoline on a fire.
Right now, the US national debt stands at a staggering $35 trillion. And it’s set to skyrocket by another $22 trillion over the next decade. Spoiler alert: it’ll probably be even worse than that. The interest payments alone are insane. This year? $1.1 trillion. That’s more than what we spend on defense!
The Debt Spiral: How Interest Payments are Crushing the U.S. Government
In 2019, before COVID chaos, the interest bill was around $400 billion. It’s nearly tripled in five years. Revenues are rising, sure. But not fast enough to keep up with the interest costs. This? It’s dangerous.
The more Uncle Sam pays in interest, the less he’s got for everything else—Social Security, the military, you name it. To keep things running, the government will borrow even more, piling onto an already massive debt mountain. And then? They’ll be buried under even higher interest payments.
The Real Reason for Rate Cuts: The Government Can’t Afford 4% Interest
That’s the real reason for these rate cuts. It’s not about a booming economy or “taming” inflation. It’s about keeping the government solvent. At $35 trillion in debt, the US government can’t afford to pay 5% on its debt.
Look back to the late ‘90s. Back then, the US ran a budget surplus. Debt was low. Inflation hovered at 1.5%. Yet even then, investors demanded a 6% return on 10-year Treasury notes.
Fast forward to now. The US is drowning in debt. Over $35 trillion of it. And investors are still taking less than 4% for a 10-year note. Why? Because the Fed insists on slashing rates, even when inflation’s lurking. They know the US government can’t afford anything higher.
The Coming Inflation Surge: Why the Fed Will Choose Inflation Over Bankruptcy
Think about it—within five years, the national debt will blow past $50 trillion. At just 4% interest, that’s over $2 trillion a year in interest payments. The Fed sees the writing on the wall: high rates are unsustainable for Uncle Sam. That’s why they’re chopping them down.
They’ll keep doing it, too. Even if it stirs more inflation. But here’s the kicker—if they have to choose between a bankrupt government or higher inflation, guess what? They’re picking inflation every time.
The Solution? Real Assets Are the Only Safe Bet
That’s why you need to hold onto real assets. Because when this inflation wave crashes, you’ll want something solid to ride it out.
Freedom Financial Research
