As we see in Europe, with negative interest rates, there are no limits to the madness.
Unlike the stripper in Miami and other overleveraged homeowners, the Fed can monetize federal debt pushing interest rates even lower. To answer our question comparing Uncle Sam and the Miami stripper: No, the odds are similar, but the government has a much longer runway to perpetuate its shenanigans. The hurt is likely too detrimental to the careers, wallets, and egos of bankers and politicians. No one wants to solve the deficit problem because the cost of fixing it involves short-term financial and economic pain. Instead, there always seems to be a more pressing issue requiring more debt which perpetuates the problem. Even those who understand the problem tell the public now is not the right time to address it. While the problem is obvious, it appears the Fed, government, and just about every banker opt to ignore it. The divergence between federal debt and the ability to pay for it accelerated during the subprime crisis and is accelerating again due to pandemic-related multi-trillion-dollar deficits.Īre the odds of perpetually increasing the gap between spending and tax revenue any better than the Miami stripper, featured in the Big Short, making good on her loans on five houses and a condo?
Over the last 15 years, debt has grown at 7x the rate of tax receipts and over 4x more than economic growth. Interest expense declined by $46 billion as Treasury debt rose by over $7 trillion over the last year.”įed magic allows for cheap funding of deficits. Federal Debt to GDP is 127%, up from 40% in 1966. Now contemplate the following: Total Federal Debt has risen 8320% since 1966. That is the lowest percentage since at least 1947. “Currently, the government’s interest expense is less than 8% of total expenditures. In Willful Blindness, we wrote the following: The graph below helps quantify the fiscal problem. Equally problematic, the collateral (home prices) backing the loans were grossly overvalued.įederal debt, while vastly different than private debt, is equally unsustainable. Chief of them, borrowers were ill-equipped to make mortgage payments if interest rates rose or incomes got compromised.
In 2008 the sub-prime mortgage market crashed for several reasons. Maybe worse, they see it but perpetuating the problem serves their interests best. Once again, those on Wall Street and the Fed do not see the debt elephant in the room. Now, a decade later, a much larger problem is brewing. Worse, well-educated Ph.Ds at the Fed, charged with preventing financial instability, had the same blind spot. Myopia and fat profits clouded the ability of many investment professionals to see the housing bubble. These investors were laughed at by Wall Street’s “best and brightest” simply for betting on an obvious truth. What they quickly found was many subprime loans were likely to default. Instead of turning a blind eye to absurdity, they did their homework. In his book and movie, The Big Short, Michael Lewis tells the story of a few intelligent and courageous investors that saw what no one else wanted to see. She's the queen and those men are her fools.“Banks have conditioned us to trust them, and what have we got from that?” – Mark Baum (Steve Carell) - The Big Short. But anything she's doing is entirely her choice. The veteran stripper is commanding, confident and unashamedly lapping up all the money that's being thrown at her. That's when Ramona (Lopez) takes the stage. She's left clasping little more than a couple of $20 bills after hours of grabby men yelling "Lucy Liu!" at her. Hustlers' focus is Destiny (Constance Wu), a stripper trying to take care of her grandmother and have enough cash left over after a night of paying off everyone else in the club, including the stage manager, the DJ and the security guard. The film, written and directed by Lorene Scafaria, is based on the true story of a group of strippers who decide to turn the tables on their clients in the wake of the GFC. There's talk of an Oscar nomination, and it wouldn't be hyperbolic to say that she's a real contender.Ī heist thriller-cross-social drama, Hustlers' weight is wrapped in the veneer of diamantés and stilettos, but there is real substance here. Hustlers is also a career-best performance for Jennifer Lopez whose oeuvre of lightweight rom-coms belie the singer-actor's dramatic talents. Lili Reinhart, Jennifer Lopez, Keke Palmer, and Constance Wu star in Hustlers.
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