As Congress prepares to spend wildly....
6 responses | 0 likes
Started by MarkB - Oct. 11, 2021, 10:35 p.m.

I can't help but to think that this will affect the DX value. But what about the bonds? It seems that bonds have been sinking ever since Congress started talking about the 2 spending bills. And now, wanting to raise the debt ceiling to make it possible.


By metmike - Oct. 11, 2021, 10:36 p.m.
Like Reply

Great topic Mark.......thanks!

By wglassfo - Oct. 13, 2021, 10:43 a.m.
Like Reply

Here is the thing as I see it

1st of all: If passed as the original bill is worded the largest part of the 1.5 bill is mostly split between public transportation {amtrack]  and highway rebuilding

Now it isn't as if nothing is being spent today, the Dems simply want to increase that amount, split  over the entire country with some kind of formula I haven't been able to find. If NYC has X times more people do they get X times more money is a question I can not find an answer. Further Amtrack and such public transportation get equal amounts of money, with highways. A lot less people using Amtrack over the entire country, but the spending is equal, amtrack vs highways and bridges, with no though as to future modes of people  moving from x to y and the need to help speed up that movement. Instead money will be spent on almost vacant highways equal of rush hr crawl in down town with no thought to a by-pass or a second by-pass

Now the 3.5 bill seems to include every social wish list you could want if you were Bernie Sanders. Free college for 1st two yrs, paid leave [what ever that is], as an example and a boat  load of money to buy EV  for all federal vechicles plus charging stations on every street corner. Even the military will buy some EV

A lot more social wish list items included but one good thing is to allow lowering prescription drugs by buying in quantity and the lowest price which doesn't happen today in your country. We have done this for ever

If the USA prints money at a scale equal to say Canada and the  U.K Germany etc GDP, then the dollar loses purchasing  power but at the same rate as Canada . We stay at approx 1.25 Cad to USD

But if you suddenly pass a 1.5 trillion and a 3.5 trillion, 1st of all you will encourage people to stay  home with all the welfare and you have just passed the biggest spending bill in the world which will need to be funded

So of coarse your DX will suffer value as will your bonds

This will be a two sided effect.

1st nobody will want to work that isn't already sitting at home and maybe a few more will decide to not work, especially if Biden fires you for not getting the jab

Your GDP will suffer greatly, as you don't have the labour to make things in the USA. Inflation will continue to increase as people bid up the price on what is available to buy. Does increased inflation seem like higher or lower demand for USD from people  like me. I don't want your dollars and will pull my money out of an ETF that tracks the USD

2nd: If you suddenly print more money than every body else then your dollar and bonds suffer from too many dollars

Simple really

By metmike - Oct. 13, 2021, 1:34 p.m.
Like Reply

I’ve always been against an increase in spending my entire life.

When I read that the biggest increase included dental care coverage for makes me think about it more.

When people see benefits to THEM it makes a difference.

By wglassfo - Oct. 13, 2021, 2:10 p.m.
Like Reply

Hi Mke 

I can see what your thought is

Dental, prescription drugs etc all at less or no cost

Looks tempting, for sure

Some body else wants a better Amtrack in NYC

Somebody else wants free college for two yrs

So all in all there is enough in these bills for you to consider passage and reap the benefits 

Now if inflation goes up by 5 % due to all the money printing, but you can afford 5 % and given the benefits you will likely come out ahead

Now some body with two incomes making a total of 40,000 or even less pay 5 % increased inflation which is is 2,000 more spent for essentials

Will they benefit by 2000.00

Some will like the proposed benefits, some will see the increased taxes and decide they are the losers

There is no right or wrong answer, but the folks that want to take a step back and maybe decide EV money spent on a fleet of federal post carriers is a bit soon and some other things that could wait a bit seem to me to be taking this seriously on what to spend and what isn't needed. Of coarse Biden wants his EV fleet of federal vechicles so there is the rub

Biden wants his legacy to be the Green spending

So if you want dental etc you will have to accept the Green spending

Which then one could argue that deficits don't matter

By metmike - Oct. 13, 2021, 9:42 p.m.
Like Reply

With regards to spending to adapt to climate change, I am actually for funding for adaptation and updating infrastructure for high end/flooding events.

In many places it was built to accomodate heavy rain events from 100 years ago.

The 1 degree C warmer atmosphere, though it's beneficial to most life, as well as the CO2........ can hold 7% more moisture. 

This means that even if its a climate optimum, with the benefits of the slight warming outweighing the negatives for at least the next few decades.......we MUST do something to address the heavier rains that are being caused by that slight warming.

Almost all of life prefers these slightly warmer temperatures but humans built big cities which are on top of miles of concrete and the extra water with heavier rains has to go somewhere. 

If the drainage systems were designed to barely handle  the old climate's heaviest rains, then you add 10% more water falling from the sky on top many  thousands of new homes and more concrete meaning even much more runoff that will go into the same's the recipe for increasing flood damage.

One-quarter of critical infrastructure at risk of failure from flooding: research

By joj - Oct. 14, 2021, 7:10 a.m.
Like Reply

Great topic.  Everybody comes at it from different angles.  My observations:

There is no political will for being fiscally responsible.  Both parties are horrible.  And they are a reflection of our national character.

There is NO WAY that the 3.5 T package is getting through congress.  Manchin and Sinema will never vote for that.  It will be 1.5-2.5 in the end.

One item where I wholly agree with Manchin and think he is MORE progressive than Bernie is the free college tuition issue.  Manchin wants subsidies to be means tested.  Bernie wants free college for everyone.  Why should wealthy people get free college?  That isn't progressive.

I'm in favor of expanding public schools for pre K.  It is one of the only government programs that has data backing its effectiveness. Kids who get a head start do better.

Do you know how much money has been spent in the last 10 years on military?  7 TRILLION!!  And we aren't even at war with anyone.  And I see nothing stopping us from spending another 7 trillion in the next 10 years.  I'd cut that in half.  But it will never happen.

I just popped up a chart of the US$.  It is trending higher.  That is a fact.  Is it because Europe is even worse than the US on fiscal responsibility?  I know that seems hard to believe.  If our imminent spending was about to crush the dollar, we would have seen it already.  Markets of forward looking.