Luke Gromen joined RyanSAdams and David Hoffman to talk about why we are in one of the scariest Macro Set-Ups in the last 20+ years. A high-density talk that we try to simplify for you in an Article in order to get a better understanding of what is actually going on

1. The first global sovereign #debt bubble since WW1 in developed markets (money printer goes brrr)

2. #Resource scarcity: Energy gets more expensive

3. #GeoPolitical Tension: Russia weaponized energy, & the US weaponized the $

The sovereign debt, the resource problem, and the Geo-Political tension combined with an overheated economy make the current times one of the scariest Macro Situations in a very long time. It's a force that most of us can't fully comprehend...yet

So is this the end of the road as discussed on the @BanklessHQ podcast with Lyn Alden? Luke Gromen believes that is true but there are 2 options:

1. Let the system collapse (deflationary chaos)

2. FED grows their balance sheet (print money)

https://twitter.com/BanklessHQ/status/1546475505804890113

The deflationary chaos will result in losses of pension funds, default on mortgages, treasury bonds, etc. On the other side, printing money will result in high inflation to prevent sovereign insolvency of the US and its allies. Luke says you have to choose inflation

But how do we get here? The dept-backed system can't endure long times of deflation without a systemic risk. The debt backs the demand of the currency so the #FED has to keep it inflated to avoid a system collapse.

The shark has to keep swimming or it drowns

When #FDR introduced social security the average life expectancy in the US was around 55. If you were lucky, you saw some pension funds. Now, the expectancy is much higher & there are 70 million #BabyBoomers coming into retirement age. That is quite a bill to pay for the government

In the 40s the US gov used inflation as a pressure release valve to avoid defaulting & insolvency. That way you can release air slowly rather than pop the balloon. It's about the speed of air coming out. We need inflation to deflate slowly according to Luke Gromen. He calculated that the US needs nominal GDP to run between 15-21% for 5 years to come to a place where the US can set policies without blowing the system up. Tightening now isn't a good idea. It’s too soon. Here is David Hoffman & RyanSAdams reaction to that:

The #FED think they can fly a plane without kerosine but they will soon realize that this can't work and that they need to start the money printer again (=inflation). They did not so far because they are a political institution, not an independent one.

1. Happy Ending: Inflation period, real rates are negative and wages go up = A weak $. Working & Middle-Class is winning

2. NGMI: Economy crash to preserve treasury holdings & global reserve currency. Strong $, China & Washington is winning

It is a tug of war between the US Working Middle class & US Treasury Holders. There will be an inflation period or an economic crash. Because there is currently a lot of volatility, Luke Gromen has some important advice: Don't use leverage

Luke Gromen joined RyanSAdams and David Hoffman to talk about why we are in one of the scariest Macro Set-Ups in the last 20+ years. A high-density talk that we try to simplify for you in an Article in order to get a better understanding of what is actually going on

1. The first global sovereign #debt bubble since WW1 in developed markets (money printer goes brrr)

2. #Resource scarcity: Energy gets more expensive

3. #GeoPolitical Tension: Russia weaponized energy, & the US weaponized the $

The sovereign debt, the resource problem, and the Geo-Political tension combined with an overheated economy make the current times one of the scariest Macro Situations in a very long time. It's a force that most of us can't fully comprehend...yet

So is this the end of the road as discussed on the @BanklessHQ podcast with Lyn Alden? Luke Gromen believes that is true but there are 2 options:

1. Let the system collapse (deflationary chaos)

2. FED grows their balance sheet (print money)

https://twitter.com/BanklessHQ/status/1546475505804890113

The deflationary chaos will result in losses of pension funds, default on mortgages, treasury bonds, etc. On the other side, printing money will result in high inflation to prevent sovereign insolvency of the US and its allies. Luke says you have to choose inflation

But how do we get here? The dept-backed system can't endure long times of deflation without a systemic risk. The debt backs the demand of the currency so the #FED has to keep it inflated to avoid a system collapse.

The shark has to keep swimming or it drowns

When #FDR introduced social security the average life expectancy in the US was around 55. If you were lucky, you saw some pension funds. Now, the expectancy is much higher & there are 70 million #BabyBoomers coming into retirement age. That is quite a bill to pay for the government

In the 40s the US gov used inflation as a pressure release valve to avoid defaulting & insolvency. That way you can release air slowly rather than pop the balloon. It's about the speed of air coming out. We need inflation to deflate slowly according to Luke Gromen. He calculated that the US needs nominal GDP to run between 15-21% for 5 years to come to a place where the US can set policies without blowing the system up. Tightening now isn't a good idea. It’s too soon. Here is David Hoffman & RyanSAdams reaction to that:

The #FED think they can fly a plane without kerosine but they will soon realize that this can't work and that they need to start the money printer again (=inflation). They did not so far because they are a political institution, not an independent one.

1. Happy Ending: Inflation period, real rates are negative and wages go up = A weak $. Working & Middle-Class is winning

2. NGMI: Economy crash to preserve treasury holdings & global reserve currency. Strong $, China & Washington is winning

It is a tug of war between the US Working Middle class & US Treasury Holders. There will be an inflation period or an economic crash. Because there is currently a lot of volatility, Luke Gromen has some important advice: Don't use leverage