Inflation Alert: Secretary Bessent Has Changed His Tune about Trump's Welfare Checks
Treasury Secretary Scott Bessent has changed his tune about Trump’s proposed $2,000 checks (approximately $600 Billion in total expense). Inflation risk has spiked as a result.
A week ago when President Trump - the most fiscally Liberal President in U.S. history - floated the idea of $2,000 Welfare checks, Bessent shot it down saying “Americans should not expect such a check”. Now, as of Sunday, Bessent is saying things like “We’ll see” and “Congress would have to look at it”. That is a big change. Bessent is clearly setting the table for CARES Act 2025.
Did the CARES Act of 2020, 2021, 2022..., the Fed’s QE Program of 2020, 2021 and 1H 2022, the Inflation Promotion Act, and other related Federal Government spending programs of the past few years teach us anything?
Handing over the Treasury to the People in exchange for zero production can only result in massive price inflation. The math only works in one direction.
Want to know why prices were far lower 5, 10, 20, 50 years ago? Primarily because the money supply grew much more slowly. The Federal Government did not run multi-trillion dollar deficits. The Fed and the banking system at large was not running QE programs, massive Repo operations, bailout programs such as the BTFP, and importantly - banks had a reserve requirement - which has stood at zero percent since 2020. Not only has it sat at zero percent, it has done so in a low interest rate environment (bank credit injects new money into the economy, thereby growing the money supply and reducing the purchasing power of the Dollar).
What is bank credit used for these days? Private Equity acquisitions and data center builds? PE acquisitions definitely do not increase economic productivity and AI data center builds are not a good ROIC - at least not yet.
Between the excess of the Public and Private sectors, the Dollar will only go lower from here, and the 10 YR yield is likely to move higher. Should Comrade Trump mail $2,000 checks to the People - effectively growing the fiscal debt and the money supply by $600 billion - the Dollar’s decline will be accelerated.
