The current inflation trend in the U.S. terrifyingly overlaps with the 0.93 peak of the massive inflation period in the 1970s, but don't blindly try to chase the sword like an old saying goes.
The core difference is: in the 70s, the U.S. debt-to-GDP ratio was only around 30%, while today it's at 123%.
Let's talk outcomes: ultimately forced to expand the balance sheet in the most extreme way.
Reason Analysis
The Volcker moment is physically sealed: at the end of the 70s, Paul Volcker dared to push the federal funds rate above 20%, effectively killing inflation. But today, burdened with $35 trillion in existing debt, even keeping rates above 6% will cause an explosive increase in annual interest payments for the U.S. Treasury, leading directly to fiscal insolvency.
Ultimate Measures (YCC and debt monetization): To prevent sovereign default, the Fed will have no choice but to completely tear off the disguise of “independence narrative” and directly enter the market to buy U.S. Treasuries in unlimited quantities to suppress yields (i.e., yield curve control YCC).
Expanding the balance sheet amidst the flames of secondary inflation is the ultimate overdraw of fiat currency credit. The system will enter an extremely harsh era of negative real interest rates (with inflation consistently hovering between 5%-8%, while nominal rates are forcibly capped at 3%-4%). This is the only “debt relief” method for highly indebted sovereign nations—long-term inflation, implicit default, quietly diluting the purchasing power of all savers and U.S. Treasury holders to forcefully shrink that staggering 123% numerator.
The core difference is: in the 70s, the U.S. debt-to-GDP ratio was only around 30%, while today it's at 123%.
Let's talk outcomes: ultimately forced to expand the balance sheet in the most extreme way.
Reason Analysis
The Volcker moment is physically sealed: at the end of the 70s, Paul Volcker dared to push the federal funds rate above 20%, effectively killing inflation. But today, burdened with $35 trillion in existing debt, even keeping rates above 6% will cause an explosive increase in annual interest payments for the U.S. Treasury, leading directly to fiscal insolvency.
Ultimate Measures (YCC and debt monetization): To prevent sovereign default, the Fed will have no choice but to completely tear off the disguise of “independence narrative” and directly enter the market to buy U.S. Treasuries in unlimited quantities to suppress yields (i.e., yield curve control YCC).
Expanding the balance sheet amidst the flames of secondary inflation is the ultimate overdraw of fiat currency credit. The system will enter an extremely harsh era of negative real interest rates (with inflation consistently hovering between 5%-8%, while nominal rates are forcibly capped at 3%-4%). This is the only “debt relief” method for highly indebted sovereign nations—long-term inflation, implicit default, quietly diluting the purchasing power of all savers and U.S. Treasury holders to forcefully shrink that staggering 123% numerator.