Why the National Debt Has Hamstrung the Fed and Legislative Update

David’s latest book, the Infinity Code, is centered around the story of a shadowy cabal bent on transforming the US monetary policy and has recently been finished.

The Fed is currently wrestling with raising interest rates in an effort to combat inflation, but they are facing an obstacle in the form of the national debt.

If interest rates are raised, which is the way the Federal Reserve usually responds to inflation, the cost to service the national debt will rise dramatically and could force the US government to raise taxes on nearly all Americans to simply avoid defaulting on the debt.

Defaulting on the debt would precipitate a global depression that would cause the stock market to tank. The debt has become so big that the main tool of the Federal Reserve has been taken away.

One of the unintended consequences of such a large amount of debt is that the debt starts to call the shots and limits your options.

The current state of the Build Back Better Plan is delayed. The legislation has been kicked down the road until 2022, and generally, legislation that wallows in Congress for too long becomes very unattractive.

The Democrats have put a deadline on the legislation of Dec 28, 2021 but even Chuck Schumer admits that it would be very ambitious to accomplish that.

Joe Manchin is in no hurry, particularly with the latest report that inflation in the US is running at 6.8% annually which is the highest it’s been in over 20 years. Senator Lindsey Graham told reporters that he spoke with Manchin and and they are largely on the same page.

One key issue with the plan is that programs that are set to expire over the next few years rarely do, and if that’s the case, the true cost of the bill would be an additional $3 trillion over 10 years.

At this point in time, we still don’t know what will happen to tax rates over the next 10 years. If Biden does get the bill passed, he will likely extend the Trump era tax cuts until 2029.

It comes down to whether you will be able to execute your tax shifting strategy over 4 years or 8 years. If you have to get all your shifting done before 2026, you will give more of your money to tax than you ever thought possible.

 

 

Mentioned in this Episode: 

Democrats brace for Build Back Better delay into 2022 - https://www.axios.com/democrats-brace-for-build-back-better-delay-into-2022-b105d083-f716-418f-9e18-c83ec2b6f68f.html