AC (Why not DC?) Flyer:
Every one of your arguments seems fragile to me. But, hey, we're after the truth, like good scientists. Let's examine. "The trade deficit is offset by the capital account." I presume you mean by this that Japan and China are buying more US bonds than the US is buying Japanese and Chinese bonds. That's right, of course. The governments of those two countries are accumulating two mountains of US Govt. bonds. The quid pro quo is that they create jobs in their countries which otherwise would not exist. At some point the jobs created won't compensate for the accumulation of all this paper. Then the game of offsetting by the capital account is over. It's an unstable situation.
There's no "rampant inflation." First you print the money and then afterward the inflation comes. When the money supply is increasing by 15% a year the consumer price index will finally give way on the up side with a vengeance. How can the government destroy all that excess money? It's around and will damage the economy in due course.
The US Debt is certainly at a usual fraction of the GNP. That's not the issue; the issue is that the debt is expanding so rapidly that its % of the GNP eventually must become abnormally high so watering the currency will be inevitable in order to pay the interest without huge tax increases.
"the right political will" ????? If we worldwide had the right political will we would reduce the planet's population to a manageable one billion by birth control, we would open the tariff gates of the rich countries to the poor countries we would give the Palestinians back their country in which they lived for 15 centuries or so, we would have no more wars, nobody would pick up anything from the street that was left by somebody else, doors would not be locked, the young would have education and food, the able bodied would have jobs, ... excuse me I'm thinking of the Chinese vision of Utopia. The real world today doesn't have much of the "right political will". The budget deficit of about half a trillion isn't pocket change unless you are much richer than the US is. Also the dedication to future wars, against Iran, Syria,North Korea, who knows what, are a kind of guarantee that the deficit will continue to be horrendous. As for the consumer debt I'm still not sure whether they are including the so called debts of us wise guys who insist on paying our credit card debts on the due date, thus paying no interest, enjoying the free loan for 15-30 days. So you may be right on that point. The general picture isn't bullish. The rich have their taxes cut and their advisers will counsel a certain amount of diversification away from US investments etc. On top of all this we have the gathering energy crisis which unlike printing money must have its effects noticed immediately especially in the world's most energy spending country. That's per capita as well as total.
Talk about needing lots of luck! |
