We need to face reality, which is the whole world is hopelessly insolvent. There are only 3 ways out: a) growth; b) inflation; c) default.
Everyone is hoping for growth. Growth is a factor of population x productivity. Population is a headwind in all developed economies. It's probably least worse in the US because of immigration, but I see that as reversing with the current political environment. So the entire burden is then on productivity. Productivity of capital has a really low bar to hurtle because of low interest rates, but as interest rates rise (due to inflation and the Fed response to it), productivity of capital will decline (i.e., you'll need a high ROR on capital to justify investment). What about labor productivity? Well where's the inflation coming from NOW? -- housing and medical. What's going to happen to building when interest rates go up? Right -- construction will take a big hit and construction workers will be out of work. What about medical? This is rather murky. We now have 60,000 Americans dying annually from opioid addiction. That means millions are addicted. So we spend a lot to address this problem, and costs go up. The then there's demographics -- 10,000 people per day are retiring and that means a lot of medical costs for the diseases of old age. So how much of medical inflation is due to these 2 items and how much real societal benefit comes out of this -- keeping old people alive and re-hab for addicts? Are we really getting better health care or is it just getting more expensive?
Maybe we are getting value for our medical outlays and that's 18% of the economy. But 70% of the economy is consumption and consumers currently are purchasing goods and services with debt. That won't continue as folks are laid off and wages can't keep up with inflation. SO MUCH FOR GROWTH.
Inflation won't work for reasons I've given already, in brief because it will quickly get out of hand, but the Fed's ability to fight it will be much reduced because debt creation will be impossible in the face of collapsing financeable opportunities.
DEFAULT. Well that's the most likely outcome. Gov'ts can't really default, but they can change the rules. Govt services and promises will be cut back. We'll end up with something like NHS in the UK -- universal health care but not very good. Retirement eligibility for Social Security will be raised. Subsidies will be cut. We'll have to reduce our global military foot print and curtail our military adventurism.