Tag Archives: government debt

Biden’s Sinking America

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Before the year is out, nearly $10 trillion may have been added to the national debt from all the spending done by a “bipartisan” majority in the Imperial City.

Critics condemn them for saddling future generations with inconceivable debt. But it’s far worse than that. The damage is being done NOW — to US. It will destroy us, and in the process wipe out any possibility of a future for those generations 50 or 100 years down the road.

The reason is not just the spending; it’s what the government is actually DOING. Under the guise of an “infrastrucuture” bill, the legislation does things like mandate the elimination of fossil fuels on the highway within a decade. What do you think that will do, not just to personal travel, but to the ability of businesses to transport food and medical supplies? It doesn’t happen by accident, or by magic. And it will take more than magic or accident to restore the damage done when millions of people suffer, or even die, once these mandates take place.

One U.S. Senator from Tennessee commented that the “infrastructure” bill is longer than the Bible sitting on his desk — considerably longer. Nobody reads the legislation they’re passing or signing (do you think Biden has?), and nobody is expected to read it. Congress is doing far worse than merely spending like drunken sailors. They’re running up debt that would sober up the worst heroin addict. It’s incomprehensible in its insanity. Inflation continues to go up. Why? Because when the government electronically “prints” more money it does not have, the value of the currency declines. This is how all economies collapse. We’re at a very real risk not just for restoring the double-digit inflation of the Nixon-Ford-Carter years of the 70s, which followed a spending spree (nothing compared to the current one) by Congress in the 1960s; we’re already back in that territory. We’re in real danger of triggering hyperinflation, the kind of currency-busting collapse that destroyed the Weimar republic in Germany (paving the way for Hitler), or that destroyed the fairly robust economy in Venezuela more recently (paving the way for the Communism and pet-eating starvation occurring there now).

I look at all the arrogant, ignorant people who watch CNN, who vote for every Democrat they can find (AOC or Bernie Sanders for President would suit them just fine), and I think: How can otherwise fairly reasonable and intelligent people be so CLUELESS? How can they be THIS ignorant of what they have endorsed and created? They move along, whistling inside their masks, assuming their great-grandchildren will live far better off than they and their children today. How could it ever all go away? This is America! The socialist republic of America, that is. Their sense of patriotism is not liberty and freedom; their sense of patriotism is a war against facts and reality, including a delusion that socialism, which has failed everywhere it’s tried, will somehow work THIS time, in America … if we can just shut up the dissenters.

Life is not supposed to be about misery and suffering. Each of us, in our individual lives, will encounter enough challenges without the government and the culture doing everything it can to bring every one of us down, and making all of us (aside from an elite, connected minority) miserable, for the rest of our days. I hardly know what to say, at this point. It all begs for a moment of silence, as a memorial to what once was, what might have been and (today) what never had to be. In 2019, America had reached a high point. And then it killed itself — seemingly, inexplicably. The suicide is happening right before our eyes. Half of us grasp it (or at least sense it); and half of us scream that while we’re done with Trump, we have to find a way to exterminate the non-socialist, the non-mask-wearing and the unvaccinated ASAP.

Increasingly, there’s not much left to say. Most of the damage has already been inflicted. Now we await the results — most of us clueless. And, as the ship goes down, the innocent — the wealth-creating business owners, the Trump “deplorables”, the lovers of liberty and rationality, and (of course) the unvaccinated — will get all of the blame. The real perpetrators will get no blame.

At its best, there’s nothing like human nature. You get scientific breakthroughs, innovations in business and technology, amazing inventions and the United States of America. At its worst, I used to say, you get Soviet Russia and Nazi Germany. Now we can add to that phrase: At its worst, you get Biden’s sinking America.

Michael J. Hurd, Daily Dose of Reason

It Is Time to Remove the Debt Barrier to Economic Growth

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Out of habit, American economists worry about federal debt. But federal debt can be redeemed by the Federal Reserve printing the money with which to retire the bonds. The debt problem rests with individuals, companies, and state and local governments. They have no printing press.

We have explained that the indebtedness of the population means there is little discretionary income with which to drive the economy. The offshoring of middle class jobs lowered incomes, and after paying debt service—mortgage interest, car payments, credit card interest, student loan debt—Americans’ pockets are empty.

This situation has been worsened by Covid lockdowns. In the US the federal government has sent out a few Covid payments to help keep people’s heads above water as they face expenses without income. The financial press refers to these Covid checks as “fiscal stimulus,” but there is no stimulus. The Covid checks do not come close to replacing the missing wages, salaries and business profits from lockdowns.

Corporations have indebted themselves and impaired their capitalization by borrowing money with which to repurchase their stock. This has built up their debt in the face of stagnant or declining consumer discretionary income.

We propose to deal with the debt crisis by forgiving debts as was done in ancient times. Our basic premise is that debts that cannot be paid won’t be. Widespread foreclosures and evictions would further worsen the distribution of income and wealth and further contrain the ability of the economy to grow. Writing debt down to levels that can be serviced would clear the decks tor a real recovery. Income that would be siphoned off in debt service would instead be available to purchase new goods and services.

A few economists muttered that we were overlooking the “moral hazzard” of absolving people of their debts. But leaving the economy stagnated in debt is also a moral hazzard.

Policymakers did not endorse our proposal, but, in effect, policymakers adopted our policy. However, instead of forgiving the debt itself, they forgave payment of the debt service. Individuals and businesses who cannot pay their landlords or lenders cannot be evicted or foreclosed until June. This doesn’t hurt the lenders or banks, because the loans are not in default, and their balance sheet is not impaired. The banks add the unpaid payments to their assets, and their balance sheets remain sound.

When June arrives, the prohibition against eviction and foreclosure will have to be extended as the accrued debt service cannot be paid. Extending the moratorium on foreclosures and evictions will just build up arrears. Is the implication a perpetual moratorium?

The question is: If policymakers are willing to forgive debt service, why not just forgive the debt. The latter is neater and clears the decks for an economic renewal.

The US economy has been financialized. Debt has been built up without a corresponding gain in productive capital investment in order to carry the mounting debt.

In financialized capitalism, the main purpose of bank loans is to refinance existing investments, not to expand productive capacity with which to service the debt. It is not possible to grow out of debt in a financialized economy, because too much income is used for debt service. The way to deal with this problem is to write down debts.

Michael Hudson and Paul Craig Roberts, UNZ Review
NOTE: The views expressed in this article are those of the authors, and do not necessarily represent those of the Artful Dilettante. It is, however, good food for thought. A/D

The “Great Reset” is about Expanding Government Power

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World Economic Forum Founder and Executive Chairman Klaus Schwab has proposed using the overreaction to coronavirus to launch a worldwide “Great Reset.” This Great Reset is about expanding government power and suppressing liberty worldwide.

Schwab envisions an authoritarian system where big business acts as a partner with government. Big business would exercise its government-granted monopoly powers to maximize value for “stakeholders,” instead of shareholders. Stakeholders include the government, international organizations, the business itself, and “civil society.”

Of course, government bureaucrats and politicians, together with powerful special interests, will decide who are, and are not, stakeholders, what is in stakeholders’ interest, and what steps corporations must take to maximize stakeholder value. People’s own wishes are not the priority.

The Great Reset will dramatically expand the surveillance state via real-time tracking. It will also mandate that people receive digital certificates in order to travel and even technology implanted in their bodies to monitor them.

Included in Schwab’s proposal for surveillance is his idea to use brain scans and nanotechnology to predict, and if necessary, prevent, individuals’ future behavior. This means that anyone whose brain is “scanned” could have his Second Amendment and other rights violated because a government bureaucrat determines the individual is going to commit a crime. The system of tracking and monitoring could be used to silence those expressing “dangerous” political views, such as that the Great Reset violates our God-given rights to life, liberty, and the pursuit of happiness.

The Great Reset involves a huge expansion of the welfare state via a universal basic income program. This can help ensure compliance with the Great Reset’s authoritarian measures. It will also be very expensive. The resulting increase in government debt will not be seen as a problem by people who believe in modern monetary theory. This is the latest version of the fairy tale that deficits don’t matter as long as the Federal Reserve monetizes the debt.

The Great Reset ultimately will fail for the same reason all other attempts by government to control the market fail. As Ludwig von Mises showed, government interference in the marketplace distorts the price system. Prices are how information about the value of goods and services related to other goods and services is conveyed to market actors. Government interference in the marketplace disturbs the signals sent by prices, leading to an oversupply of certain goods and services and an undersupply of others.

The lockdowns show the dangers of government control over the economy and our personal lives. Lockdowns have increased unemployment, caused many small businesses to close, and led to more substance abuse, domestic violence, and suicide. We are told the lockdowns are ordered because of a virus that poses no great danger to a very large percentage of the American public. Yet, instead of adopting a different approach, politicians are doubling down on the failed policies of masks and lockdowns. Meanwhile, big tech companies, which are already often acting as partners of government, silence anyone who questions the official line regarding the threat of coronavirus or the effectiveness of lockdowns, masks, and vaccines.

The disastrous response to Covid is just the latest example of how those who give up liberty for safety or health will end up unfree, unsafe, and unhealthy. Instead of a Great Reset of authoritarianism, we need a great rebirth of liberty!

Ron Paul

The Dangers of Government Debt

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It is that time again when liberals, sensing the possibility of being in control, are revving up the debt engines. So many things need to be done in a post-COVID world, and there is so little revenue to pay for it. Debt is the way out, they claim.

Now is the time to borrow a way out of the crisis. Congress has not even waited for the New Year.   Bipartisan efforts are currently underway to negotiate a quick fix for the bargain price of just under a trillion dollars.

Debt Addiction Affects Everyone

Unfortunately, debt addiction affects both political parties. Every administration this century has run budgets at a deficit. The average deficit over the last two administrations has been around one trillion dollars annually. The COVID crisis has been an occasion to throw caution to the wind and borrow like there is no tomorrow.

Some Republican legislators maintain the role of a fiscal conscience. They loudly complain about deficits, especially when the opposition is in power. However, the uproar has diminished as officials scramble to find the means to throw money at the problems they want to go away.

Embrace and Love Debt

The latest buzzword in economic circles is that Americans should not deplore but embrace debt. They should even learn to love it as a saving tool in a chaotic world.

Of course, most Americans need no tutorials on how to embrace debt. Consumers are buried in some $14.3 trillion of it. They manage to spend it on houses, cars, education, home improvement, and credit-card charges. Everywhere they go, they spend beyond their means. In the frenetic intemperance of the marketplace, embracing debt comes all too readily.

Loving debt is more difficult, especially when the bank notices come due. People learn quickly that unsecured commercial acts have abrupt and tragic consequences.

A Fiscal Paradigm Shift

However, the rules that apply to consumer debt that can end so badly do not apply to government spending. Such fiscal acts apparently have no negative consequences.

Thus, liberals are asking that the floodgates of federal debt be opened. Now is the time to help those suffering from the coronavirus crisis, build up its sagging infrastructure and finance their wish list of underfunded causes.

Liberal economists say there is no cause to worry about federal debt. The New York Times’ Paul Krugman, for example, explains that the nature of government debt has changed. He claims there has been “a fiscal paradigm shift” that makes borrowing different and desirable. “The bottom line is that government debt just isn’t a major problem these days.” 

Reasons to Borrow

They wrongly claim debt is not a major problem for many reasons. One of them is that America borrows in its own currency and thus can always issue more money to finance its debt. The circular logic of the Modern Monetary Theory (MMT) is popular among liberal legislators anxious to receive a blank check to expand federal spending.

However, the main reason why columnists like Krugman encourage debt is because of the low-interest rates that make money cheaper to use. He argues that there are no red lines in the sand dictating the limits of how much can be borrowed. Conservative legislators conjure up these red flags to scare people into not spending money.  

Thus, he says cheap money costs the taxpayer little in the long and short term in interest payments. If there is a time to spend, now is that time. The U.S. government should take full advantage of this opportunity to invest heavily in the future. That means making big government bigger. That means public investment in climate control, education and children (as long as they are not unborn). The panic of the coronavirus gives the spending spree a sense of urgency.

What is there not to love in this new fiscal wonderland where every liberal desire can be fulfilled as if by magic? There are so many reasons to embrace and love debt.

Very Dangerous Assumptions

The Krugman solution is based on very dangerous assumptions. What he proposes is the equivalent of borrowing money from oneself, over and over again with an ever-increasing principal. It might also be compared to paying an extra-low minimal monthly payment on an ever-increasing credit card bill. As long as people make timely payments, everything will work out fine.

It presupposes order and stability over the long term. Krugman affirms that in today’s upside-down world, there will always be very low-interest rates. He notes that “all indications are that they’ll stay low for years to come.”

Issuing government debt also assumes that people worldwide will want to buy American debt — and a lot of it.  As the world’s reserve currency, most people see treasury bonds as a safe harbor despite their low yield. However, should something unexpectedly disastrous happen to America, all this could change — just as life changed with the coronavirus crisis.  

Such wildly optimistic assumptions are dangerous. One great financial calamity could bring down the whole system as it almost did in 2008. It would introduce a new “fiscal paradigm shift” of a different nature.

Changing the Nature of Things

There is something metaphysical in all this debt magic. It reflects the socialist mentality that holds human nature can be changed, and the most bizarre schemes can thus be implemented.

In this case, the “love-debt” scheme contains the idea that people will act responsibly once they realize they possess a money machine that produces as much cash as they want. Such wishful thinking ignores the fact that fallen human nature always seeks the easy way out. People will turn to the cash machine whenever difficulty strikes. In addition, corrupt people will find ways of gaming the system to favor their self-interest. Once the floodgates of unbridled debt are opened, they will follow the unbridled passions to ruin. Human nature has not changed in the face of easy money.

However, liberal moneymakers also want to change the nature of money and debt. Money is an obstacle for those who want a world without restraint. It creates inequalities that liberals wish to overthrow. Money forces people to make an effort to exchange the value of their actions for goods and services. People with jobs delay gratification by working so that they might later enjoy the fruits of their labor. Those who work harder will earn and prosper.

Debt is a ticket to instant gratification. It delays working so that people might enjoy now the goods and services they desire. The need to pay back loans curbs people’s desire to borrow and introduces an element of responsibility.  

Living in the Krugman Fantasyland

In the Krugman fantasyland, the nature of money changes. It is no longer the same means of exchange, measure of value and storehouse of wealth. Money becomes the great equalizer that allows everyone to share wealth regardless of the disparity in their efforts. It becomes a mechanism created out of nothing to serve the political ends of government. Debt is no longer a burden that needs to be paid off. It is a revolving door of obligations that can be put off indefinitely. The nature of debt changes when there is no intention of repayment.

When debt has no immediate consequences, gratification rules. A society thus organized is beholden to the only real power left — a strong central government ever ready to issue more money to “borrow its way out of every crisis” until the day of reckoning comes. If they choose to do this in their personal lives, the consequences are theirs alone to bear. However, it is criminally negligent for political leaders to clamp the debt millstone around America’s neck and still expect the country to swim its way to safety.

Those who embrace and love debt do so at their own risk.

John Horvat II, American Thinker