In the United States, there is a lack of monetary and fiscal control

On his YouTube channel, Jose Luis Cava analyzes the impact of high interest rates on American citizens, as well as on their monetary and financial policy.

47% of Americans realize that their standard of living is deteriorating and being eroded by inflation. This is how a report from the University of Michigan is compiled, which José Luis Cava transmits to us. In turn, he comments that what draws his attention is that this percentage increases over time. “In the last report, the number was 39 and now it has risen to 47.”

Through this graph, the analyst is trying to explain the excess liquidity that Americans have, but based on the size of their income. “The top line, this blue line is the excess liquidity held by Americans whose income level is in the top 1%. The orange line represents the excess liquidity held by Americans whose income level is in the top 20% of earners. It stands to reason that these people have A large surplus of liquidity. Will these people be harmed by higher interest rates? Will these people reduce their consumption because Powell raised interest rates so much? Well, no. On the contrary, “They will spend more because as Powell raises rates further, they will get a bigger reward for their excess liquidity.”“, points out the expert.

Continuing with the graph, Cava says that in the remaining 71%, “the level of excess liquidity has already disappeared in the second quarter of 2023, which is why these people, to continue maintaining their income level, are withdrawing credit cards. Their outstanding balances are increasing, They charge an interest rate of 23%, which is why unpaid bills are so high.

The expert wonders who will be harmed by the new rise in interest rates. “To this group, to the weakest. It will make them consume less, because if they are already consuming less, what will they do? Credit cards have a limit. I don’t think the banks will allow them to continue increasing given the level of defaults they are recording. Therefore, it is clear that Consumption will deteriorate. “I don’t know if it’s this quarter or the next, but that seems to be deteriorating.”

He also focuses on what he sees as the other engine of growth in the U.S. economy: public spending. Therefore, the question arises: Does it make sense for Powell to raise interest rates to slow the growth of the economy, while Janet Yellen, who is responsible for fiscal policy, spends at full speed? “No, that doesn’t make sense. So we can conclude that.” There is a lack of monetary control and a lack of financial control. Janet Yellen announced yesterday that she will issue public debt to North America in the remainder of 2023 and in the first quarter of 2024 worth $1.5 trillion. That is, he will spend as if there is no tomorrow. Powell will continue to keep interest rates high. But what will stop you when interest rates rise, my friend? You will stop consuming and you will hurt the weak. “The rich are doing well, and Janet Yellen doesn’t care.”

The interest bill on public debt in North America has reached an unprecedented record level. “There is clearly a lack of monetary and financial control, but not only in the United States, but in Europe, with the fiscal deficits that Italy, France and Spain are suffering from. Then how can we, the good speculators, protect ourselves from this lack of monetary and financial control ?Well, it’s obvious to buy gold, bitcoin and Swiss francs.

Regarding the S&P 500, Cava explains that since it closed in the green one day, its downward trend has not been modified. “We think a recovery may happen and that’s what we think is happening.”

“The S&P 500 reached the 4,177 area yesterday, and there is a support area around 4,132. Well, we have opened a slight long position. As long as the S&P 500 remains above 4,132 we will hold it. With a target in the 4205-4225 area. If 4,132 is drilled, we will cancel Long deal.

Follow us on the investment strategies WhatsApp channel

Investment Strategies launches its WhatsApp channel, Completely free so investors can follow today’s most interesting reports and analysis, as well as news, free courses and short, medium and long-term investment ideas.

Follow us easily in private WhatsApp by clicking on this link.