---
title: Economics - A Bullet Fired Into the Sky Eventually Floats
description: We are in a strange period when the government can print money at no apparent cost.
image: https://info.c-loans.com/hubfs/Bullet%20shot%20in%20the%20air.jpg
---

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## [Economics - A Bullet Fired Into the Sky Eventually Floats](https://info.c-loans.com/economics-a-bullet-fired-into-the-sky-eventually-floats)

Posted by [George Blackburne](https://info.c-loans.com/author/george-blackburne) on Thu, Feb 11, 2021

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![Bullet shot in the air](https://info.c-loans.com/hs-fs/hubfs/Bullet%20shot%20in%20the%20air.jpg?width=179&name=Bullet%20shot%20in%20the%20air.jpg)"May you live in interesting times," is an English expression that is claimed to be a translation of a traditional Chinese curse.  While seemingly a blessing, the expression is normally used ironically.  Life is better in "uninteresting times" of peace and tranquility than in "interesting" ones, which are usually times of trouble.  *Wikipedia.*

 

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Well, we are certainly living in interesting times.  As the future Dictator of the World, Xi Jinping, continues to mobilize his 1.4 billion citizens for world conquest, the Biden Administration continues its quest to print up $1.9 trillion to rescue the U.S. economy.

It's ironic.  I am a Republican and a fiscal conservative, but right now,  I generally agree with Biden's plan.  We have to do something; otherwise, the U.S. money supply will contract like an imploding black star.  Let me explain.

Loans have payments, and America sure has a lot of loans outstanding.  As Carl Sagan, the famous astronomer, might have said, "Trillions and trillions of them."

 

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Congress, the U.S. Treasury, and the Federal Reserve can create all kinds of new money, but much of this new money just gets used to make all of the monthly interest payments on our existing debt.

Here's a metaphor that might explain this concept.  Picture the breakfast table in your kitchen.  Now cover it with 36 sponges.  Next, take your tea kettle, fill it with water, and then slowly pour the contents over the various sponges.

This is what is happening to the U.S. money supply.  Each time the Federal government prints up new debt and then has the Fed buy it - thereby ***monetizing the debt*** - its like refilling that tea kettle with more water.  

 

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Yes, if we keep refilling that tea kettle, those sponges will eventually become over-saturated.  They will no longer hold any more water.  Water will then spill all over the table, down the sides, and onto the floor.  We will have horrible hyper-inflation.

But right now, those sponges are still holding water.  In fact, those sponges are hungry for more water.  The banks want their loan payments, so we have to keep creating new money.  

For the next few years, Congress should be able to keep deficit spending and the Fed should be able to continue its campaign of quantitative easing, without having the dollar completely collapse.

 

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Yes, the dollar fell 6.7% last year.  **A free-falling dollar would be the sign that the game was finally over**.  At that point in time, Congress would have to stop deficit-spending and the Fed would have to greatly reduce quantitative easing.  That would send interest rates higher, which should greatly curtail inflation.

But for right now, we are in an unusual economic zone, when we can apparently create massive amounts of new money, at little immediate cost.  

If you fire a bullet into the air, eventually it will slow, as gravity pulls it back.  There will come a time when its upwards momentum has almost been been spent, and the bullet seems to float.

 

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In terms of the money supply, this is where we are at. 

I always watch the price of gold.  As I have pointed out in the past, gold is only a so-so hedge against inflation.  Gold kicks butt, however, during times of deflation, when companies start defaulting on their bonds.  Remember, gold is one of the few assets that is not the debt of another.  **Gold cannot default.**

**Important Warning About Gold:**  

When the stock market crashes, about every ten to fourteen years (its been 13 years since 2008), gold crashes, along with everything else.  The reason why is because gold falls less than anything else, so investors dump their gold first to get liquid again.  After the initial panic and rush to liquidity, gold starts to pick sooner than stocks and bonds.  That's when to jump into gold.

 

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So what is gold telling us today?  It has been trending lower recently, which suggests that massive corporate bond defaults are not immediately imminent.  That's a good thing.

The belief in the credit markets is that Biden will likely get his big relief package, which will continue to prop up the markets for a time.  This isn't a horrible financial and monetary zone to occupy for a few years.  "It's fun to float, a half-mile up in the air," said the bullet.

 

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"That's all great and everything, George, but what was that comment about Xi Jinping being the future Dictator of the World?"

May you live in interesting times.  *Haha!*

 

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Tom Brady photoshopped into a Bears uniform.  
My golf buddies can be so cruel.

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