For 25 years, I traded U.S. Treasury debt for financial institutions on Wall Street. For the last 20 years, since 9/11, America has borrowed a staggering amount of money. First to finance the War on Terror, then to bail out the housing sector, and most recently to fund enormous COVID pandemic expenses. Like a lot of bond market pros, I always wondered when America would hit the break point, when the borrowing binge would finally become painful.
Well, that time is now. Since the election of Joe Biden, we’re seeing a spike in inflation like we have not seen in decades. Our country borrowed too much for years, but global capital always believed in the U.S. growth story and gladly lent money on super-generous terms, without any inflationary fallout.
But now, with President Biden and the Squad as managers of USA Inc., that value proposition is dissipating, and fast. Don’t take my word for it; just look at the mad rush into inflation assets. Gasoline has more than doubled at the wholesale level with futures on gas rising from $1.07/gallon to $2.30/gallon since Biden’s election, hitting the highest prices at the pump since 2014 at $3.23/gallon for the average consumer, and over $4/gallon in some American locales.
But it’s hardly just a gasoline story. Commodities across the board soar higher as investors flock to physical assets to try to stay ahead of the emerging Biden inflation spike. For example, coal prices have surged 83% this year, pork prices are up 51% year-to-date, while coffee prices have almost doubled, up a staggering 91% since Election Day. Don’t believe the administration’s excuses that these increases are the natural fallout of an economic recovery. Just this week, we learned of the telling miss on overall GDP growth. The second quarter saw only 6.5% overall expansion, well beneath Wall Street expectations of 8.4%.
By Steve Cortes