Category Archives: Inflation

The Dynamics Of US Government Debt (& Bankruptcy)

Debt, Economy, Inflation

$120 Trillion: That’s a reoccurring figure in my writings on the economy. It’s, plus/minus, the sum total of the American government’s debt, including unfunded obligations and promises. According to Princeton’s Garry Becker and Richard Posner of the University of Chicago Law School, “evaluating a nation’s economic condition” involves comparing not the “public debt (government bonds) to Gross Domestic Product,” but comparing “assets and liabilities.”

“The major asset of any government is its taxing power, which of course cannot be equated to the entire GDP, or the entire value of the nation’s human and physical capital; for both economic and political reasons, the taxing power is limited to a percentage of GDP well below 100 percent. And, realistically, the liability side of the national ledger includes not only government bonds but also other contractual obligations, entitlements, and at least strongly anchored expectations concerning government services (we’re not about to eliminate our armed forces). In addition … the national balance sheet must be reckoned in dynamic terms, with due regard for likely increases both in GDP and in liabilities, especially increases in entitlement spending that are likely to result from the continued ageing (sic) of the population.”

“Because American tax rates are low by international standards and resistance to increasing them is fierce, … the ratio of current U.S. public debt to realistically realizable tax revenues is 3.58 to 1, which is the highest by a large margin of the countries in the report’s list.”

If you’re looking for the usual pacifier—European countries are way worse off than us in terms of profligacy—DON’T. Only Greece comes close to the Us’s “ratio of current public debt to realistically realizable tax revenues. … because of the uncertainty of the future), America’s net worth is negative, and this negative net worth is eight times larger than our GDP. This means that the net present value of the government’s liabilities, minus assets, is approximately $120 trillion.”

Another theme on these websites of mine: The political resistance from the oink sectors is too intense to effect change (were it not already too late).

The Becker-Posner blog reckons that “the bondholders and holders of other contractual rights against the government have to start worrying about the prospects for outright default or default through inflation. These are possibilities in our future, just as in the future of Greece.”

But if you were reading this space (including the regular posters in the Comments Section), you already knew that.

The Dynamics Of US Government Debt (& Bankruptcy)

Debt, Inflation

$120 Trillion: That’s a reoccurring figure in my writings on the economy. It’s, plus/minus, the sum total of the American government’s debt, including unfunded obligations and promises. According to Princeton’s Garry Becker and Richard Posner of the University of Chicago Law School, “evaluating a nation’s economic condition” involves comparing not the “public debt (government bonds) to Gross Domestic Product,” but comparing “assets and liabilities.”

“The major asset of any government is its taxing power, which of course cannot be equated to the entire GDP, or the entire value of the nation’s human and physical capital; for both economic and political reasons, the taxing power is limited to a percentage of GDP well below 100 percent. And, realistically, the liability side of the national ledger includes not only government bonds but also other contractual obligations, entitlements, and at least strongly anchored expectations concerning government services (we’re not about to eliminate our armed forces). In addition … the national balance sheet must be reckoned in dynamic terms, with due regard for likely increases both in GDP and in liabilities, especially increases in entitlement spending that are likely to result from the continued ageing (sic) of the population.”

“Because American tax rates are low by international standards and resistance to increasing them is fierce, … the ratio of current U.S. public debt to realistically realizable tax revenues is 3.58 to 1, which is the highest by a large margin of the countries in the report’s list.”

If you’re looking for the usual pacifier—European countries are way worse off than us in terms of profligacy—DON’T. Only Greece comes close to the Us’s “ratio of current public debt to realistically realizable tax revenues. … because of the uncertainty of the future), America’s net worth is negative, and this negative net worth is eight times larger than our GDP. This means that the net present value of the government’s liabilities, minus assets, is approximately $120 trillion.”

Another theme on these websites of mine: The political resistance from the oink sectors is too intense to effect change (were it not already too late).

The Becker-Posner blog reckons that “the bondholders and holders of other contractual rights against the government have to start worrying about the prospects for outright default or default through inflation. These are possibilities in our future, just as in the future of Greece.”

But if you were reading this space (including the regular posters in the Comments Section), you already knew that.

UPDATE III: Oz Is Alright, Economically (Electorally? Now That’s Another Matter)

Debt, Economy, Elections, Inflation, Political Economy

PBS reporter Stuart Cohen “thinks” that what has kept Australia’s “unemployment rate just over 5 percent,” and that country’s economy still humming,” is, in part, “government spending”—that has “helped keep Australia out of recession.”

“PETER HARTCHER, political editor, of he Sydney Morning Herald,” believes the same: “The big and searing experience out of this was that, when there was a global financial crisis, and suddenly countries everywhere were in trouble, the Australian government had enough money in the kitty that it was easily able to enact a massive stimulus massive at least in proportion to our economy.

The consequence is one of the only countries in the world that didn’t have a recession. And this experience has now been burnt into the national consciousness, and it’s put a real premium on getting back to surpluses as quickly as possible.”

[SNIP]

HARTCHER’s right about not overspending. Most people outside Washington DC would think of this as stating the obvious. But it is despite the pursuit of porkulus policies that Oz is not looking as bad as the US. The relative prudent financial management of the country’s affairs has meant that the economy can shoulder some Keynesian mischief without buckling under.

UPDATE I (Aug. 21): For those of you who are interested in events outside the USA (not a common occurrence among Americans, in my experience), here is a dispatch from the frontlines of the Australian election. I’ll provide the name of our lively correspondent, whose style you probably recognize, pending his say-so. UPDATE III (Aug. 22): He is no other than R. J. Stove (read his comment and corrections hereunder):

I woke up this morning to the news that yesterday’s election seems to have resulted in a hung parliament (the first at national level since 1940-1943).

The obnoxious Gillard – “Sickening Excuse For A Woman” (SEFAW for short), as Paul Gottfried calls her – has been given a kick in the teeth, but Tony Abbott’s Liberals (despite gains in Queensland and New South Wales) appear unable to form a majority.

It’s the Green party which is cock-a-hoop, with, I believe, nine senators now (as opposed to five previously) and with gains in the House of Reps (where it had lacked any members at all since the
1990s, if memory serves me).

Last night on TV we had the diverting spectacle of Gillard’s vile Environment Minister Penny Wong, who owes her political clout entirely to being a Chinese lesbian, being upbraided by a Greens candidate for “homophobia.” Frankly, to me the Greens are such cartoonish villains that I can’t work up all that much indignation against them.

If we absolutely must have pro-abort, pro-Third-World-immigration and pro-homosexual-“marriage” politicians at all, I prefer them to be outside rather than inside the Catholic Church or “movement conservatism.”

This is some of the latest media coverage of the poll (complete with a recording of Gillard’s cement-mixer speaking
voice).

[SNIP]

UPDATE II: By comparison, “the number of Americans filing for unemployment benefits increased by 12,000 to 500,000 last week, taking economists and the White House by surprise. President Obama, on his way to a 10-day vacation with his family on Martha’s Vineyard, said the report underscores the need for”… yes, more government deficit spending.”

UPDATE III: Oz Is Alright, Economically (Electorally? Now That's Another Matter)

Debt, Elections, Inflation, Political Economy

PBS reporter Stuart Cohen “thinks” that what has kept Australia’s “unemployment rate just over 5 percent,” and that country’s economy still humming,” is, in part, “government spending”—that has “helped keep Australia out of recession.”

“PETER HARTCHER, political editor, of he Sydney Morning Herald,” believes the same: “The big and searing experience out of this was that, when there was a global financial crisis, and suddenly countries everywhere were in trouble, the Australian government had enough money in the kitty that it was easily able to enact a massive stimulus massive at least in proportion to our economy.

The consequence is one of the only countries in the world that didn’t have a recession. And this experience has now been burnt into the national consciousness, and it’s put a real premium on getting back to surpluses as quickly as possible.”

[SNIP]

HARTCHER’s right about not overspending. Most people outside Washington DC would think of this as stating the obvious. But it is despite the pursuit of porkulus policies that Oz is not looking as bad as the US. The relative prudent financial management of the country’s affairs has meant that the economy can shoulder some Keynesian mischief without buckling under.

UPDATE I (Aug. 21): For those of you who are interested in events outside the USA (not a common occurrence among Americans, in my experience), here is a dispatch from the frontlines of the Australian election. I’ll provide the name of our lively correspondent, whose style you probably recognize, pending his say-so. UPDATE III (Aug. 22): He is no other than R. J. Stove (read his comment and corrections hereunder):

I woke up this morning to the news that yesterday’s election seems to have resulted in a hung parliament (the first at national level since 1940-1943).

The obnoxious Gillard – “Sickening Excuse For A Woman” (SEFAW for short), as Paul Gottfried calls her – has been given a kick in the teeth, but Tony Abbott’s Liberals (despite gains in Queensland and New South Wales) appear unable to form a majority.

It’s the Green party which is cock-a-hoop, with, I believe, nine senators now (as opposed to five previously) and with gains in the House of Reps (where it had lacked any members at all since the
1990s, if memory serves me).

Last night on TV we had the diverting spectacle of Gillard’s vile Environment Minister Penny Wong, who owes her political clout entirely to being a Chinese lesbian, being upbraided by a Greens candidate for “homophobia.” Frankly, to me the Greens are such cartoonish villains that I can’t work up all that much indignation against them.

If we absolutely must have pro-abort, pro-Third-World-immigration and pro-homosexual-“marriage” politicians at all, I prefer them to be outside rather than inside the Catholic Church or “movement conservatism.”

This is some of the latest media coverage of the poll (complete with a recording of Gillard’s cement-mixer speaking
voice).

[SNIP]

UPDATE II: By comparison, “the number of Americans filing for unemployment benefits increased by 12,000 to 500,000 last week, taking economists and the White House by surprise. President Obama, on his way to a 10-day vacation with his family on Martha’s Vineyard, said the report underscores the need for”… yes, more government deficit spending.”