Whack-A-Mole

As we came out of Covid during which the government was obligated to pass several multi-trillion-dollar spending bills to protect laid-off workers and rescue failing companies who had been thrown into dire straits by the government-imposed lockdowns, the only prudent fiscal approach at that point was austerity by our legislature and President. Since we were forced to overspend during Covid to keep our economy from completely imploding because of the lockdowns, we had to do everything possible to bring some level of fiscal sanity back to the country. But the exact opposite happened. In2021, the Democrats who now controlled both houses of Congress and the White House, decided to go on a spending spree. The Democrats motto is “never let a crisis go to waste” and they were sure as hell not going to allow the Covid crisis to go to waste without exploiting it for their own purposes, so they passed two unnecessary multi-trillion-dollar spending bills in the first year of the Biden administration which were essentially paybacks to their wealthy political donors who handed Joe Biden the White House. 

 When that much money is spent in such a short period of time by the government, the fed is forced to print an inordinate amount of dollars to help limit the explosion of the national debt. Printing as much money as we have over the last three years caused inflation to spike to over 9%. So, in response to this government spending induced hyper-inflation, the fed drove up interest rates in 2022, hoping to bring inflation under control. Printing money out of thin air like we have done in 2021 and 2022 devalues our currency, making each dollar is worth less and less, so driving up interest rates increases the cost to borrow money which brings value back to the dollar which helps tame inflation. But this strategy is not without real life consequences as we are witnessing with the collapse of the Silicon Valley Bank (SVB), the largest bank failure since the Great Recession and second largest bank failure in history.