Debt

Fed Chairman Powell is justifiably concerned by the growing level of debt in the United States ... and this is because, at about 2.70%,  for a 10-year government bond, interest rates throughout the economy are at very low levels. This, of course, encourages borrowing instead of equity financing. Powell sees a debt crisis in the U.S. looming and he is likely right.

However, the rib is ... interest rates in other developed countries are quite a bit lower ... except for the U.K. They are well below 1%. So, if America is n danger, the rest of the developed world is in extremis. This suggests that an almost-certain debt crisis will start elsewhere and then spread to our shores.

Of course there are problems compounding this threat:

- The U.S. national debt, at close to $22 trillion, means that interest payments on this debt can easily consume our annual budget as rates go up. This puts pressure on the Fed to keep rates low ... and also let inflation run to monetize this debt.

- The large differential between American interest rates and the rest of the developed world means that the "carry trade" drives up the dollar and hurts  our balance of payments. This should do nothing but encourage the Fed to keep rates from going up further until others start tightening ... with a nudge from Trump.

Bottom line: Powell is right to be concerned, but this is not just an American problem ... it is worldwide. And Trump should take up this cause too ... not that he doesn't have enough on his plate already.