Founders PM: Wells Fargo Finds Fiscal Religion
Should We Worry About American Debt? Time to Reconsider?
Housekeeping: Good Evening
We hope Americans can summon the courage to make these choices before market forces require them.
-Wells Fargo’s Chief Economist Jay H. Bryson
Contents:
Intro:
Why it Matters: Breaking the Bad News
TL/ DR
Wells Fargo Bottom Lines:
Slide Deck:
Full Report:
Intro:
This is a 5 part paper on the US public debt problem. It is written by the Chief Economist and his best staff at Wells Fargo.
The bottom line has been broken out here. Also depicted are the slides relevant to their discussion. The full report is included as well at bottom.
Reading the TL/DR and their Bottom Lines will suffice if you have been a reader of our previous works on this topic
Why it Matters: Breaking the Bad News
In additon to their several problems with the SEC and DoT, Wells Fargo is well known as a bank in which the Neo-Keyensian ideology of money is ensconced.
This report is a talkthrough for employees and clients attempting to begin to adjust expectations lower. It is not crying the sky is falling, nor is it telling readers everything is all right . It is gently breaking the news to both employees and clients that things are going to be drastically different, especially for the middle and investor classes.
It is walking back the MMT ideology that had permeated commercial banks.
For us, as financial participants, career traders, and readers (and writers) of reports like this since 1989, it amounts to a policy paper. Policy is changing.
Policy is changing to reflect what has been discussed in this space for the last 2 years. Specifically, the fallout of increased spending in a deglobalizing world and a need to reshore manufacturing while simultaneously dealing with an aging unskilled workforce.
TL/ DR
Federal Government Debt is way too big
Houshold debt is not
With shrinking foreign investment in the US debt market, the private sector will increasingly be pushed into buying US gov’t debt as a replacement. This will start with the Banks themselves who will then press clients to buy more US debt
Corporate America is generally ok, but financial firms are definitely not
They do not expect a crisis per se, but they do expect material changes in the Standard of living as the Gov’t grapples with this debt.
Taxes must go up even if spending is cut-
Services will be cut back, including untouchable ones like Social Security
The bank “Hopes Americans can summon the courage to make these choices before market forces require them.”