$16.4 Trillion in Debt By End of Year


So this is what the “age of budget austerity” looks like?

Yesterday, the Senate voted against a measure to disapprove of Obama’s request for an additional $1.2 trillion of debt.  Every Democrat (except for Ben Nelson and Joe Manchin) voted against the resolution.  Consequently, pursuant to the Budget Control Act (the “debt ceiling deal”), Obama will automatically get his new credit card.  Our debt will increase by another $1.2 trillion, topping $16.4 trillion by the end of the year.

Here are the relevant numbers that should define Obama’s presidency, yet they will not be disseminated in the major media.  When Obama took office, the total federal debt stood at $10.6 trillion.  By the end of his first term, the debt will be at least $16.4 trillion, an increase of $5.8 trillion.  To put that in perspective, it took us until late 2001 (from our nation’s founding) to accrue $5.8 trillion in debt.  Even President Bush, who was a big-spending Republican, racked up “only” $4.9 trillion over 8 years.

Let’s now explicate the debt figures as a percentage of our economy.  Our total federal debt and our GDP stand at parity.  The debt is $15.281 trillion, while our GDP is 15.294 trillion.  It is unlikely that our economy will grow by more than a 2-2.5% annualized rate in the coming year.  On the other hand, with the additional $1.2 trillion of debt, our national debt will grow by 7.9%.  In other words, our GDP will remain below our gross debt indefinitely.

Unfortunately, the Republicans are not innocent from reproach in this debt crisis.  While every Republican except for Scott Brown voted for the resolution of disapproval, most of them supported the debt ceiling deal that engendered this disaster in the first place.  Only 19 of the 47 Senate Republicans opposed the debt deal, which gave Obama a defacto blank check to raise $2.1 trillion in debt without any transformational budget reforms.  We have already raised the debt ceiling by $900 billion since passage of the Budget Out of Control Act.  Today, by default, Obama was granted the rest.

This just underscores the need to focus on congressional races.  We might win back the Senate in November; however, if we continue to elect those who will vote for similar inane legislation, it will be worthless.

Cross-posted from The Madison Project


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*sigh*

DerKrieger (Diary) Friday, January 27th at 12:14PM EST (link)

The only way to stop this madness is to forcibly strip the federal government of its usurped powers and cram it back into its constitutional box. And the only way to do that is by reestablishing federalism and the 10th Amendment. Politicians in DC will not willingly give up power, even some so-called conservatives. It must be taken from them. Work your butts of to elect 10th Amendment conservatives statewide who will work to shrink the federal government or else be prepared fo things to continue as they have been until the eventual, unavoidable financial collapse.

http://www.redstate.com/derkrieger/

“In questions of power, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.” – Thomas Jefferson

“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” – James Madison

Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience.” — John Locke, 1690

"unavoidable financial collapse"-we'll take one please.

skicougar (Diary) Friday, January 27th at 12:50PM EST (link)

considering that obama will push every button to make things look better this year to get re-elected, he’s either going to be re-elected or the people needed to be in DC to reverse things will not have the money to beat out the RINOS already holding seats.

The passion of 2010 just isn’t there.

I would suggest buying gold and shorting the stock market in january 2013.

Eat ‘em up Houston Cougars !

Good time to buy durable goods

bob08034 Friday, January 27th at 1:13PM EST (link)

If you need a refrigerator or a car or whatever, it’s better to buy it now than to save up and buy it later when your money is worth less. Or maybe worthless.

We bought a wood burning stove — insulates us from inflation in energy.

What no one seems to realize is that all this debt has been crowding out private investment. Banks had been borrowing zero interest money and using it to buy TBills. Who wouldn’t take a guaranteed return on free money over underwriting a loan to a business. Duh.

Except that

Death_of_the_Donkey (Diary) Friday, January 27th at 2:27PM EST (link)

there hasn’t been any inflation, private non-residential investment is way up from the bottom, and business loans are back to mid 2007 levels.

No inflation.....

scmom Monday, January 30th at 2:17PM EST (link)

On what planet do you reside? Or do you not purchase energy, food, clothing, anything? The federal government may tell us there is no inflation, but only a blind, deaf, agoraphibic (doesn’t leave their house) hermit would believe it!

Nonsense!

 
 
 

especially if obamacare is upheld.

Common_Cents (Diary) Friday, January 27th at 2:10PM EST (link)

When in the history of the US has any major entitlement been repealed? There is no way to put the obama genie back in the bottle once unleashed.

Obama=Golfer in Chief, Leading from, behind, the Back Nine.
Leaders don’t create movements. Movements create leaders. Get involved. Your future depends on it.
Govt “invests” YOUR tax money for POLITICAL return rather than economic return.

 
 

The problem with invoking the 'federalisim' mantra on fiscal issues

Dave_A (Diary) Sunday, January 29th at 7:18AM EST (link)

Is that the states are far more irresponsible than DC.

Rearranging what level of government has the power to do what is just shifting the deck-chairs on the Titanic…

The money will still be spent, and the public debt will still grow – just at state & local rather than federal levels…

Formerly known as dcacklam – they finally fixed my access to the ‘profile’ page

Let the states go broke then.

arthurjake Tuesday, January 31st at 6:16AM EST (link)

With the responsibility comes the liability. I could care less how broke California goes if I am not forced to pay for it.

 
 
 

alcoholics do have to hit bottom and it looks like that is only way we will get the message. NT

benko Friday, January 27th at 12:55PM EST (link)

Pennsylvania Senate Race

bobguzzardi Friday, January 27th at 1:47PM EST (link)

Sen. Bob “98%” Casey is Pennsylvania’s Democratic Senator. Sen. Casey is one of the nicest people in Pennsylvania and there is no malice or meanness in him. Personal attacks are disgraceful and counterproductive.

This is a winnable race although the pundits and Establishment do not think so. Pat Toomey won in 2010 by a narrow margin and since then he has done nothing but gain respect of all. Pennsylvania voted for Ronald Reagan in 80 and 84 and faux Reagan in 88. One would think the Establishment would go with what works but it worked to undercut Pat Toomey each step of the way starting with 2004. Pat Toomey is INDEPENDENT OF LEADERSHIP.

On the issues, Sen. Casey is a Blue Collar Union Democrat and Obama Enabler voting with the President Obama 98% of the time. One of the candidates, Steve Welch of southeast Penna financed the production of this very clever video which has caught some national attention .

Here is the link at Blaze http://www.theblaze.com/stories/gop-senate-candidate-releases-spoof-ad-obama-was-separated-at-birth SEPARATED AT BIRTH … a fast 6 min

The issues of debt t that Daniel Horowitz succinctly summarizes is an issue that, in my opinion, resonates in Pennsylvania and I will forward to the various campaigns.

I am supporting TOM SMITH who is, also, INDEPENDENT OF LEADERSHIP and has put $4,000,000 of this own money into his campaign bank account. Tom Smith was a Union Democrat Coal Miner who grew into a Coal Mine Owner, which he sold for 30 or more millions, and now is focused on doing what he can as a Constitutional Limited Government Free Market Pat Toomey Republican.

The other Republican candidates are all good people and the voters are fortunate that Establishment has concluded Bob Casey can’t be beat.

Not to go off thread but I would like to bring your attention to Barry Rubin’s comments on President Obama’s State of the Union speech on foreign policy. Barry Rubin posts at PJMedia and his latest on the President’s foreign policy

Friday, January 27, 2012
As The State of the Union Speech Shows: The Problem with Obama Isn’t Just Political or Ideological, It’s Ignorance, Inexperience, Character, and Incompetence, Too,
By Barry Rubin

http://pjmedia.com/barryrubin/2012/01/27/as-the-state-of-the-union-speech-shows-the-problem-with-obama-isnt-just-political-or-ideological-its-ignorance-inexperience-character-and-incompetence-too/

If there are Pennsylvanians reading this blog, please contact me at bobguzzardi@bobguzzardi.com and I have a blog The Liberty Blog www.thelibertyblog.org

Thanks Daniel Horowitz for perceptive, factual blogging.

PA Senate race

Freedoms Truth (Diary) Friday, January 27th at 2:14PM EST (link)

You should make this a diary. Good report.

thank you

bobguzzardi Friday, January 27th at 11:04PM EST (link)

GW Bush won in 2000 and 2004 without Pennsylvania but I am not so sure it can be done 2012.

My sense is that Newt Gingrich is more likely to win Penna than Mitt Romney.

Rick Perry is still The Guy.

 
 

casey won the senate seat because of his fathers coattails

mikeymike143 (Diary) Friday, January 27th at 2:21PM EST (link)

the political climate has changed since then and casey is vunerable.

I am the Media Director for Tea Party Fort Lauderdale, America’s Longest Running Tea Party.

http://www.teapartyfortlauderdale.com/

Please click on our TPFL facebook page and ”like” us. http://www.facebook.com/#!/pages/Tea-Party-Fort-Lauderdale/187610141278242

I also own the largest anti Ron Paul page for conservatives on Facebook.

Casey Jr is a fraudulent phony prolifer

Freedoms Truth (Diary) Saturday, January 28th at 12:33AM EST (link)

His support for obama and in particular obamacare without any prolife riders exposed him a phony on this issue.

Casey is vulnerable manly because he has been a do-nothing wallflower, and hasnt been out in front on anything. maybe that way you offend less people. but the ‘what has he done to help’ question needs to be asked, especially since PA has been hurt by Obama’s bad econ policies, which Casey has supported.

He's a phony everything

Adjoran (Diary) Saturday, January 28th at 10:01PM EST (link)

He had two previous government jobs and didn’t show up half the time for either. The only thing he’s ever done that was pro-life was to claim to be pro-life.

He is 100% riding on his Dad’s name – in fact there were many people who thought they were voting for Senior, not realizing he was dead (these are Democratic voters, not the brightest bulbs on the tree).

 
 
 
 

I don't think most people....

tnguy Friday, January 27th at 2:05PM EST (link)

… can even explain what a trillion is. I would wager a majority in congress could not. They have no grasp whatsoever. They think the gov’t can just dole out $$$ with no repercussions, or sadly, in many cases, think that things won’t collapse for decades, so why worry about today?

Does anyone think the “Guam Capsize” guy can appreciate how much debt that is?

$16 trillion is $130,000 per taxpayer….$50K per citizen.Can all of you pay your fair share? I can assure you Bill Gates, Donald Trump, et al cannot make up the difference. Not to mention that medicare, social security, and state and local gov’t guaranteed benefits are probably each greater than the national debt itself.

This is why I, regrettably, probably can not vote for the republican nominee this year. For the first time in my life. Our silly arguements over debates and other trivial matters look foolish in light of the mountain we face.

Conservative in the primary, republican in the general has been and is a recipe for disaster. It’s led us to the place we are now, so it demonstrably does not work. We should be drawing the sharpest contrast between the dems and us, not nominating someone just because they appeal to both sides. Nothing more demonstrates the superiority of our ideals than the results of a conservative president vs. the disgrace we have now. Instead we’ll wind up with a nominee who will merely try to fix Obama’s programs, instead of unwinding them completely.

 

Well here is part of the reason.

Marcus_Traianus (Diary) Friday, January 27th at 3:08PM EST (link)

I can’t state it any better than IBD did today;

While it’s true that the country has been headed in this direction for many years — with the explosion in entitlements since the 1960s and the aging of the population — Obama has, in fact, greatly accelerated the trend. Examples:

Direct payments. The amount of money the federal government hands out in direct payments to individuals steadily increased over the past four decades, but shot up under Obama, climbing by almost $600 billion — a 32% increase — in his first three years. And Obama’s last budget called for these payments to climb another $500 billion by 2016, at which point they would account for fully two-thirds of all federal spending.

People getting benefits. According to the Census Bureau 49% now live in homes where at least one person gets a federal benefit — Social Security, workers comp, unemployment, subsidized housing, and the like. That’s up from 44% the year before Obama took office, and way up from 1983, when fewer than a third were government beneficiaries.

Food stamps. This year, more than 46 million (15% of all Americans) will get food stamps. That’s 45% higher than when Obama took office, and twice as high as the average for the previous 40 years. This surge was driven in part by the recession, but also because Obama boosted the benefit amount as part of his stimulus plan.

Disability. The number of people on Social Security disability has steadily climbed since the 1970s, thanks mainly to easier eligibility rules. But their numbers jumped 10% in Obama’s first two years in office, according to the Social Security Administration. That sharp rise was due largely to meager job prospects since the recession ended in 2009. When employment opportunities are scarce, experts note, many who could otherwise work sign up for disability benefits instead.

“Both of our political parties, at least the honest portion of them, agree conscientiously in the same object—the public good; but they differ essentially in what they deem the means of promoting that good. One side believes it best done by one composition of the governing powers; the other, by a different one. One fears most the ignorance of the people; the other, the selfishness of rulers independent of them. Which is right, time and experience will prove.”.Thomas Jefferson

 

For Tea Party supporters...

rhampton (Diary) Friday, January 27th at 6:16PM EST (link)

…it would be helpful to think/talk/present the makeup of Congress not in the traditional Republican – Democratic majorities/minorities, but instead as the number of Tea Party members versus non-TPers. At present, who among the Representatives and Senators on the Hill should be considered worth of that designation? However you choose to decide, there can be no doubt that only a minority of the men and women of the 112th United States Congress would qualify — and it will take a majority of such folk to enact major reforms. So let’s see a count of where we are today and what it will take to reach that goal.

 

The pigs rush to the trough while they can.

johnt Saturday, January 28th at 9:58AM EST (link)

Push those snouts in while there’s ample slop and forget the talk about our children’s future, so prominent in past years.
We see two groups, the Haves, for the most part the politically connected, and the rest, viewed as the Horse in Orwell’s Animal Farm. This is politics taken to it’s natural end, a means of addictive theft, it never stops & most never learn. Visit the lefty sites and you will see the ignorant crying for more, not less of this crime.
And as usual, our media, ignoring Europe and bleating on behalf of this degradation.

“a man’s admiration for absolute government is proportinate to the contempt he feels for those around him”. Tocqueville

 

An alternative explanation for the fed reserve plan

downstateray Sunday, January 29th at 2:58AM EST (link)

We heard from Mr Bernanke this week. He is recommending that interest rates be kept artificially low for another 2 years. His song and dance supporting this decision does not make sense. I suggest an alternative motivation.

Consider that the US currently pays $773 million PER DAY ($228 billion per year) to pay the interest on its debt. If interest rates rise 1%, that DAILY payment balloons to $1.2 billion ($438 billion per year). If interest rates rise 2%, that DAILY payment balloons to $1.6 billion ($584 billion per year). A 5% increase takes that payment to over $1 trillion per year.

Mr Bernanke and the FED are simply carrying the water for the inept we call a Congress. The truth is that letting interest rise to a more customary level would expose our most inconvenient truth… the US cannot pay back what it owes.

We the people either do not understand or do not want to hear about it because it is so unpleasant. The trouble is that every dollar borrowed will have to be repaid by taxpayers. Now we argue among ourselves which taxpayers should get the bill.

All politicians, including conservatives, seem to be unwilling to show leadership. Some like Sen Sanders thumb their nose at aausterity, doling out bonuses to staffers reather than return any excess funds to the Treasury. Almost universally the politicians speak in platitudes without specifics. The modest austerity plans proposed (Bowles-Simpson; Ryan Plan) get demagogued.

We must recognize that government services will have to be cut. We must understand that those cuts will hurt lots of folks (young, old, rich and poor). We must give up the notion that monopoly money can continually be printed to make it look like things are better, And yes we must understand that our taxes will go up. Otherwise the hidden tax of inflation will consume all of our money, which by the way seems to be the current plan of our government.

 

An alternative explanation for the fed reserve plan

downstateray Sunday, January 29th at 2:58AM EST (link)

We heard from Mr Bernanke this week. He is recommending that interest rates be kept artificially low for another 2 years. His song and dance supporting this decision does not make sense. I suggest an alternative motivation.

Consider that the US currently pays $773 million PER DAY ($228 billion per year) to pay the interest on its debt. If interest rates rise 1%, that DAILY payment balloons to $1.2 billion ($438 billion per year). If interest rates rise 2%, that DAILY payment balloons to $1.6 billion ($584 billion per year). A 5% increase takes that payment to over $1 trillion per year.

Mr Bernanke and the FED are simply carrying the water for the inept we call a Congress. The truth is that letting interest rise to a more customary level would expose our most inconvenient truth… the US cannot pay back what it owes.

We the people either do not understand or do not want to hear about it because it is so unpleasant. The trouble is that every dollar borrowed will have to be repaid by taxpayers. Now we argue among ourselves which taxpayers should get the bill.

All politicians, including conservatives, seem to be unwilling to show leadership. Some like Sen Sanders thumb their nose at aausterity, doling out bonuses to staffers reather than return any excess funds to the Treasury. Almost universally the politicians speak in platitudes without specifics. The modest austerity plans proposed (Bowles-Simpson; Ryan Plan) get demagogued.

We must recognize that government services will have to be cut. We must understand that those cuts will hurt lots of folks (young, old, rich and poor). We must give up the notion that monopoly money can continually be printed to make it look like things are better, And yes we must understand that our taxes will go up. Otherwise the hidden tax of inflation will consume all of our money, which by the way seems to be the current plan of our government.

Your take on the Fed is absolutely incorrect.

Dave_A (Diary) Sunday, January 29th at 7:14AM EST (link)

Bernanke isn’t carrying water for Congress, he’s ‘carrying water’ for the business community & individual citizenry.

The notion that the FED’s monetary policy exists to enable government spending – and the corollary that ‘inflation is a hidden tax’ are both ABSURD.

The US government owes a huge amount of money, true… But it also has huge revenues & various other factors that make it eminently creditworthy.

However, the average American – and many American businesses – ALSO owe huge amounts of money – especially when you consider the difference in income between the two…

Any sort of action to reduce the money supply (which is what raising interest rates does) will DESTROY the smaller debtors (that’s us, the people/taxpayers) long before it has ANY impact on government spending. Why? Because as dependent as the government is on credit, the citizenry & American business are even more dependent…

If the government had to make do on it’s annual revenue, services would be cut & some things downsized, but the government would survive… There would still be money to enforce the law, collect taxes, field some semblance of an Army & keep people who belong there in prison…

However, if any other level of society had to make due on annual income – with no access to credit, we’d see widespread bankruptcy & destitution. No more 30-day receivables cycle… Consumer spending at a standstill… Purchases of any item or property more expensive than half a week’s paycheck? Not happening…

And that’s what happens when your monetary policy artificially reduces the money supply to a level sufficient to reduce spending – spending STOPS – but not government spending, everyone else’s spending stops first… Hello Deflation, Hello Great Depression….

Lesser reductions of the supply (lesser hikes in the rate) have a less severe effect, but an effect none the less. It’s an artificial supply-shortage – exactly like creating a ‘gas line’ for money

Further, Inflation is NOT a tax – it’s a market reality. It doesn’t ‘take’ anything from the overwhelming majority of us who have property and debt but no cash…

Remember: If the value of money goes down slightly, the value of everything else that said money buys goes up slightly. So the dollars you earned in the last two weeks may have lost ~2/52nds-% (our present growth-stiflingly-low rate of inflation) of their value, but the stuff you own gained the same (all other things being equal)….

The only people harmed (or in the above poster’s terms, ‘taxed’) by inflation are those foolish enough to store their wealth in cash, or below-inflation-returning accounts…. But the beneficiary of this is not the government (hence the fallacy of using the word ‘tax’) – it’s everyone else in the economy who doesn’t do those things – and that’s the majority of us. Inflation isn’t a tax – it’s an opportunity cost for living a different financial life from the majority of the American market’s consumers.

Formerly known as dcacklam – they finally fixed my access to the ‘profile’ page

I find your explanation a bit lacking

kyle8 (Diary) Sunday, January 29th at 7:22AM EST (link)

Inflation is indeed a hidden tax. Or at least it has the same effect. You seem to be saying that you are OK with ever expanding monetary policy and near zero interest rates.

But those are the policies that brought us to this recession. I also do not see zero interest rates giving any sort of boost to economic activity. Maybe that is because the Fed has made it unprofitable for banks to loan money at near zero interest rates.

“Nothing works like freedom, Nothing succeeds like liberty”
Kyle

Kyle8: Inflation is in NO WAY a tax.

Dave_A (Diary) Sunday, January 29th at 7:45AM EST (link)

A tax takes money from business & the citizenry, and gives it to a government agency.

Inflation doesn’t do that.

Inflation reduces the wealth of an extreme minority who keep their wealth in cash and cash-equivalents, true – but this ‘reduction’ is NOT given to government. Rather, the ‘reduction’ is offset by an increase in the quantified-value of everything else in the economy.

If the value of money goes down, the value of goods and services go up by the same amount – all other things being equal.

The PROBLEM with inflation, is when it occurs at such a frantic rate that money loses value before it can be spent… But that’s not where we are right now.

Rather, we are sitting on the opposite situation – where the money supply refuses to grow & thus prevents the economy from doing the same.

You can’t have economic growth, if the supply of money needed to fuel that growth doesn’t increase first. A limit on the money supply, is a hard-limit on the size of the economy. There’s no way around this.

Also, you completely misunderstand the cause of the current economic situation & the role of the Fed’s rate in the market- low interest rates have nothing to do with it. Rather, government over-regulation & forced lending to unqualified borrowers are the cause.

Cheap credit WITH HIGH LENDING STANDARDS actually HELPS the economy by making it easier for new firms to open and existing ones to expand – and on the consumer end, enables spending by creditworthy consumers. So long as banks are allowed to be choosy as to who they lend to, the risk to the bank is low, which enables them to charge a lower risk premium, ergo cheaper credit OR higher bank profits – both of which are good.

HOWEVER, when the government forces lending to bad credit-risk firms and or consumers, then unless you make credit so expensive that it’s out of reach (and create a depression in the process – no credit, the economy stops) you will have a catastrophe.

Also, the zero-to-near-zero federal-funds-rate does absolutely NOTHING to the rates that banks can charge as interest. True, the reduction carries through to the consumer, but that’s just like any other cost-of-materials reduction – since the bank’s price to ‘buy’ money from the Fed went down, they can ‘sell’ it to the consumer for less without changing their bottom-line one bit. That is the ONLY impact that a zero FFR has on how much a bank charges it’s customers to borrow.

So YES, in the end, I support an indefinitely expansionary monetary policy – because you can’t have economic growth without one.

That doesn’t mean rates need to stay at zero forever, but they should ONLY be allowed to rise once inflation and growth have both returned to healthy levels. We’re not there yet… If we had 3%-and-climbing inflation, we would be…

I have zero concern for the small minority of contrarians who decided to have all cash & no debt. There is an opportunity cost to every economic choice, and I’m not going to have government bail them out with ‘price stability’ policies, at the cost of choking the rest of the economy to death.

Formerly known as dcacklam – they finally fixed my access to the ‘profile’ page

5 @ Dave_A (nt)

jakeofalltrades (Diary) Sunday, January 29th at 8:32AM EST (link)

your view is not sound

kyle8 (Diary) Sunday, January 29th at 11:00AM EST (link)

In the first place it is not necessary to have economic growth without an artificial growth in the money supply. Economic growth, when it does occur will cause the money supply to increase on it’s own by fractional reserve banking.

Second. You are correct that bad lending policies pushed by government are a large reason for the collapse, but they are not the only reason. Cheap money and cheap credit led to a general over borrowing by all firms and consumers.

Third. Inflation has other problems besides just harming those who hold cash. Wages are sticky and do not increase as quickly as the general rate of inflation, some people, especially older people are stuck on fixed incomes, and inflation causes a premium to be paid by borrowers, of which our already bankrupt government is the largest.

“Nothing works like freedom, Nothing succeeds like liberty”
Kyle

I'd disagree, Kyle

Dave_A (Diary) Sunday, January 29th at 11:45AM EST (link)

First, your view of growth puts the cart before the horse – the fractional reserve system is how we increase or decrease our money supply, however if the money supply is too small, the market interest rate (eg, end-user, not fed-funds – they are independent) will be too high & there will be no growth. Money has to be supplied before it can be used, and that’s what the Fed does…

Second, ‘over-borrowing’ is not caused by too-low rates, but rather by poor lending standards. Without the lending-standard distortion (and the wider effects of the secondary markets & derivatives system that were created because of it further enabling more risky lending), the ‘cheap money’ would not be offered to those who were over-extended and thus could not repay it, so no one would be able to economically over-borrow… It’s 100% lending standards, and 0% interest rates.

Third, economic policy should not be made based on the needs of the fixed-income minority… And while yes, there is an inflation premium reflected in the interest-rate for fixed-rate debt (for variable-rate debt, the rate just goes up), the damage done by contracting the money supply is far greater than the cost of said premium.

Formerly known as dcacklam – they finally fixed my access to the ‘profile’ page

I have to agree with kyle

aesthete (Diary) Sunday, January 29th at 1:08PM EST (link)

Your view on inflation is too generalized to be sound. *Some* inflation is good and natural, and will happen through private mechanisms — for example, kyle’s increase of the money supply due to fractional banking. Inflation is by no means always good for the economy, however — have you ever heard of “stagflation”? There’s also a good case to be made that Greenspan’s monetary policy enabled several of the bubbles which are the cause of our current economic crisis. We don’t need to go to the extremes of Argentina or the Weimar Republic for inflation to have a deleterious effect.

Generally speaking, deflation is to be avoided — however, there are times when it is necessary (see the beginning of Reagan’s administration), and they certainly don’t justify the dramatic increase in inflation to meet unemployment/economic indicators which have so characterized the Bernanke and latter Greenspan tenures.

The act of defending any of the cardinal virtues has today all the exhilaration of a vice – G.K. Chesterton

You claim there was a 'dramatic increase in inflation'

Dave_A (Diary) Tuesday, January 31st at 4:23AM EST (link)

Yet by statistical measurements it has stayed below 3%.

Further, I never said ‘any amount’ is good – I said 3%. If we had, for example, 4% heading for 5, then we could say there’s a problem.

But we have had ~1% since 08. Not Good.

That’s the problem with the ‘Fed-caused-bubble’ theory: The inflation never happened.

Formerly known as dcacklam – they finally fixed my access to the ‘profile’ page

 
 
 
 
 
 

think again

downstateray Tuesday, January 31st at 11:36PM EST (link)

“The US government owes a huge amount of money, true… But it also has huge revenues & various other factors that make it eminently creditworthy.”

Do the math. I did. And it is very plain that US revenues will soon be consumed entirely by interest payments alone. If the US government started paying $1 billion per day, each day every day 365 days a year, it would take over 38 years to pay off the existing debt. Inflating our way out of this debt is not possible.

“Further, Inflation is NOT a tax – it’s a market reality. It doesn’t ‘take’ anything from the overwhelming majority of us who have property and debt but no cash… ”

You cant say that. Most Americans have little beyond their paycheck and maybe a house. Seniors depend on fixed income, and our population is aging rapidly. Today we learned from Case-Schiller that are homes worth less again despite the inflation. If you have filled your tank or bought groceries and/or kids clothes, it would be abundantly clear that todays dollar goes far less.

“The only people harmed (or in the above poster’s terms, ‘taxed’) by inflation are those foolish enough to store their wealth in cash, or below-inflation-returning accounts…. ”

Point me to one bank with an interest bearing account paying 2%. You cant find one thanks to Mr Bernanke. And I dont think anyone is foolish for staying out of the stock market. Wall Street has proven quite well what harm it can inflict. And you cant eat gold or silver.

“The notion that the FED’s monetary policy exists to enable government spending – and the corollary that ‘inflation is a hidden tax’ are both ABSURD.

No you are absurd. I will defer to Ronald Reagan:

“Let’s turn to your paycheck, because here’s where the government really profits from inflation. We have a progressive income tax. As your income increases you find the government takes a higher percentage, say, of the second $10,000 you earn than of the first. Now, let’s say you get a raise simply to keep even with the increased cost of living, to make you able to buy what you could before the raise. But you can’t, for that increase in the number of dollars puts you into a higher tax bracket. The government takes a greater share of those new dollars. And suddenly you find you haven’t kept up with inflation. After taxes your worse off than you were before the raise. Nine times out of ten, though, you blame high prices, not your taxes.”

Let the market, not the heavy hand of the fed, determine interest rates.

 
 
 

What's more worrisome is the unfunded mandates.

radicalrighty Monday, January 30th at 10:18AM EST (link)

Social Security, Medicare. What, $20-30 Trillion more?

 

Maybe going broke is not a bad thing.

arthurjake Tuesday, January 31st at 6:28AM EST (link)

Maybe going completely broke to the point where we can not borrow more would be the best thing imaginable. It would be painful at first but the government would have to be drastically cut as a result. Everyone agrees that once an entitlement is put into place there is no getting rid of it. Going broke would force us to get rid of ours. The pain it would cause on people is almost a good thing because it would teach them to trust in themselves and not the crumbs the state can provide. As hard as it would be it would make for a lesson not soon forgotten.