Re: What's coming ? Inflation of deflation ?

On Sat, 20 Jun 2009 16:05:41 -0400, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:

El Castor wrote:

On Sat, 20 Jun 2009 08:22:25 -0700 (PDT), Werner <whetzner@xxxxxxx>
wrote:


On Jun 20, 7:40 am, Gary <n...@xxxxxxxx> wrote:

A good article by Gary North. It needs to be read online to be
appreciated. There are links to graphs.

http://www.lewrockwell.com/north/north722.html


An excellent articles. Thanks for sharing.


Werner, check out Gary North in connection with Y2K. He predicted mass
starvation and the end of civilization. In my book, Gary North has
zero credibility. I would as soon waste my time reading Nostradamus.

By the same token, there is no doubt that left wing deficits pose an
enormous threat to the economy. Something that most people don't
realize is that the threat isn't just inflation. In an economy as sick
as the one we're in, rising interest rates will prevent a sustained
recovery, keep us in the economic doldrums, which in turn will depress
the rate of inflation. Potentially a real mess, but not the end of the
world. If you want to see where we're headed just look at what out of
control left wing spending has done to California.

Jeff, I didn't realize that there was a difference between a left-wing
deficit and a right-wing deficit.

Good question. Let me explain. Say you've got two deficits, but one is
four times bigger than the other. That big one, that would be your
left wing deficit.

I mean, after all, the deficit
doesn't know where it came from, or who was responsible for it.
It just acts the same way all deficits do, with all that entails for the future
economy. It just starts where the economy is at the time it was
created, and works its magic on the variables as they exist at the time.
With all that entails, as I said, for our future.

Yes, quite right -- "with all that entails", but here's the rub.
Deficits in and of themselves are important, but it's what they do to
the national debt that is most important. Most economists, including
those employed by the EU, have identified a critical tipping point in
the national debt -- 60% of GDP. The EU will not admit a new member
state with a debt exceeding 60% of GDP because the fiscal
irresponsibility that allowed a debt to grow that large would
jeopardize the economic stability of the EU itself, and by jeopardize
I mean weak growth, high unemployment and inflation.

"The problem of public debt has of late attracted increasing
attention, especially as a consequence of the Maastricht Treaty, which
? among other things ? has required E.U. countries not to exceed a
public debt/GDP ratio of 60%"
http://www.unicatt.it/docenti/pasinetti/pdf_files/publicdebtweb.pdf

The debt ratio at the end of the Bush administration stood at 41% --
not great, but tolerable, and well within the bounds prescribed by the
Maastricht Treaty. On the other hand, the CBO under Director Douglas
W. Elmendorf, a man appointed by Nancy Pelosi, has examined the Obama
budget which was just passed by a party line vote of the Democrat
Party. The CBO is required by law to extend the consequences of the
annual budget out ten years. Here's what it had to say about the Obama
budget:

"The cumulative deficit from 2010 to 2019 under the
President?s proposals would total $9.3 trillion, compared
with a cumulative deficit of $4.4 trillion projected
under the current-law assumptions embodied in
CBO?s baseline. Debt held by the public would rise,
from 41 percent of GDP in 2008 to 57 percent in
2009 and then to 82 percent of GDP by 2019 (compared
with 56 percent of GDP in that year under
baseline assumptions)."
http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf

Here's a very scary visual aid that spells out graphically what the
CBO was talking about.
http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html

But it gets worse. If some of the healthcare proposals that are being
tossed about are enacted, we (or more properly the left wing) will be
digging the hole a Hell of a lot deeper.

Now, if deficits are bad, they're bad, period. And I agree that a long
range deficit as a way of life is not in our interests. And those long
range deficits seem not to have a particular source. they come from
both sides of the aisle, and have at different times. For now, it's
coming from the left side of the aisle, but for the past four years it
came from the other side.

True! I've been bitching about Bush deficits for years, but look at
this graph again.
http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html
Comparing Bush deficits with Obama deficits is like comparing a big
wave on a stormy Sunday afternoon with a frigging tsunami.

Fact remains, deficit spending is required in an emergency, such as
WWII, and a serious economic downturn, such as now.

Some is, I agree, but once again, look at the graph. If the trend was
down after 2012 we wouldn't be having this conversation. As for
2009-12, while I agree that extraordinary measures were necessary, I
think there is a good argument to be made that in some respects it's
over the top. When the Europeans and the Chinese start expressing
doubts, maybe it's time to take a step back and listen?

You might want to
question the wisdom of Obama's adding to it, with health care reform,
although needed, may have been bad timing. Fiscally, I think he could
and should have waited on that one. But we have a serious economic
crisis to face, and historically, deficit spending seems to be the way
out. Granted, we need to have a way to somehow dry up the money supply
and anticipate the inflationary circumstances which we both agree will
definitely come, and right now, we don't have any specifics. I don't
know if we will EVER get advance planning, as no one really knows how to
specifically control our economic output, no matter what they say.
Economics is not a science, and never will be. It's really just a best
guess from a particular philosophical set of beliefs as to what society
needs. Nothing more. Which is why we have both right and left-wing
economists.

So, I only have a gut feeling that the FED is mindful of the potential
pitfalls, and will take the necessary steps when the time comes.
Personally, I don't like to be placed in the position of always having
to react; I think advance planning is best, but as I said, there is no
specific set of guidelines to take under these circumstances.

And as far as California has gone, look where our economy has gone due
to all the right wing outsourcing. The right wing has outsourced our
societal wealth so they can make a profit at the expense of everyone
else. Some patriots, those right wingers.

California's single largest problem is a Democrat dominated
legislature that beginning in the 70's increasingly became a thing of
the public employee unions. As I heard someone put it the other day,
it's hard for a public employee union to lose when they have a seat on
both sides of the bargaining table.

"If, since 1990, state spending increases had been held to the
inflation rate plus population growth, the state would have a $15
billion surplus instead of a $42 billion budget deficit, which is
larger than the budgets of all but 10 states. Since 1990, the number
of state employees has increased by more than a third. In
Schwarzenegger's less than six years as governor, per capita
government spending, adjusted for inflation, has increased nearly 20
percent."
http://www.mercurynews.com/ci_12280934

As for outsourcing, California needs to do more, not less. California
pays $45,000 a year to house each prison inmate. (The prison guards
union is one of the most powerful in the state.)
http://www.sacbee.com/walters/story/1584888.html
Oklahoma pays less than $9,000 per prisoner held in the privately
operated Allen and Winn correctional centers.
http://www.doc.state.ok.us/offenders/ocjrc/97_98/cost%20effectiveness%20comparisons.pdf
.

Relevant Pages

  • The Bush Budget Deficit Death Spiral
    ... a structural part of the U.S. economy. ... The first signs of impending trouble are the exploding budget deficits ... the national debt stood at $995 billion. ... The forecast ten year surplus stood at $5.6 trillion. ...
    (soc.retirement)
  • Re: NBC: America IS Fiscally Responsible
    ... I recently talked about the people in the "Debt Doomsday" crowd and their ... inability to see the federal government's debt and deficits in context. ... Government spending now, under President Bush, is much the same as it was ... frame of reference is how big the economy has grown. ...
    (rec.music.artists.springsteen)
  • NBC: America IS Fiscally Responsible
    ... I recently talked about the people in the "Debt Doomsday" crowd and their ... inability to see the federal government's debt and deficits in context. ... Government spending now, under President Bush, is much the same as it was ... frame of reference is how big the economy has grown. ...
    (rec.music.artists.springsteen)
  • Re: NBC: America IS Fiscally Responsible
    ... whether his "deficits don't matter" claim is just baloney or not. ... lying to the American people for the umpteenth time. ... The Bush-Cheney team has racked up another $3 trillion in debt in just 6 ... All the signs indicate that the economy ...
    (rec.music.artists.springsteen)
  • Re: NBC: America IS Fiscally Responsible
    ... For one thing his arguments are opposite of traditional conservative thinking: "Government is not supposed to be run like a business", ... I recently talked about the people in the "Debt Doomsday" crowd and their inability to see the federal government's debt and deficits in context. ... we are given a bunch of nonsense about deficits choking off economic growth or how the "skyrocketing" deficit will drive up interest rates. ... Government spending now, under President Bush, is much the same as it was under Clinton, when viewed as a percent of the economy. ...
    (rec.music.artists.springsteen)
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