Lacy Hunt: Both Presidential Candidates Will Only Make Our Debt Problem Worse

Nobody has a good plan

Now that it seems the Fed has officially pivoted, what will lower interest rates mean for the economy and financial markets?

Will they be enough to keep recession at bay and prevent a further rise in unemployment?

What will the $trillions of investor capital currently parked in T-bills and money markets go if the yields on those assets go down?

For a true expert's view on these important questions, we have the great fortune to sit down today with one of the greatest living economists, Dr. Lacy Hunt, former Senior Economist to the Federal Reserve Bank of Dallas, as well as several of the world's largest global banks. He now serves as Executive Vice President and Chief Economist of Hoisington Investment Management Company.

We also discuss his views on the economic plans (as understood so far) of both presidential candidates.

The punchline? Lacy is not impressed.

For a very important discussion with a very smart man, click here or on the video below:

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Adam’s Notes: Lacy Hunt (recorded 8.27.24)

EXECUTIVE SUMMARY

• The U.S. has experienced five consecutive quarters of negative net national savings, a significant and concerning development totaling approximately -$150 billion. This phenomenon has only occurred twice before in modern history, during the Great Depression and the Great Financial Crisis. The current situation is particularly alarming because it is happening even as the economy continues to grow, indicating deep structural issues.

• U.S. monetary and fiscal policies are misaligned, with fiscal deficits exacerbating the economic situation. The Federal Reserve is considered to be "behind the curve," meaning it has been slow to respond appropriately to economic conditions. The current policy environment is highly restrictive, with real M2 money supply growth being negative by about 4% annually over the past four years, further tightening economic conditions.

• The U.S. and its major trading partners, including China, Europe, and Japan, face significant demographic challenges characterized by aging populations and low birth rates. For instance, the average age in China is expected to reach 43 in the next two years, while Japan's average age will soon hit 50. These demographic shifts are expected to suppress economic growth both domestically and globally, leading to lower levels of consumption and economic dynamism.

• Inflation, driven by factors such as supply disruptions and excessive money supply, has disproportionately