Luke Gromen Comments on Alan Greenspan


Monetary

Updated Mar 15th, 2021

“Peak Prosperity” YouTube video March 2021, see video here.

Another video here that makes me ask what happens if China stops buying treasuries. Around 30 mins.

Stocks and US GDP relationship.

In 2015 Alan Greenspan said it is not well known how big a part of tax receipts is played by the equity markets and if the stock market stops going up, there will be a fiscal crises. You can infer that everyone at the Fed and Treasury knows that. Nominally it may not look this way but it is a very levered system. Consumers, corporations, government, derivates on leverage. Net capital gains plus taxable IRA distributions are 200% annual growth of personal consumption expenditures, PCE. This is a big category (boats, cars, stuff you buy at Walmart, healthcare services, etc. ) 2/3 of US GDP. PCE doesn’t grow if stocks fall and stay down and if PCE doesn’t grow and it makes up 2/3 of US GDP then it’s almost impossible for GDP to grow and with debt to GDP at 130% the system is in trouble and could Default on entitlements, military, or treasuries but that’s never going to happen. Stay more liquid than the us government in that if you can stay liquid for the 2-3 months if the system freezes up and goes down you can get in and wait for the pump which will send prices higher like we saw March 2020.