I Pledge Allegiance to Octavia

Since the below Onion video came out the national debt has doubled to 19.8 trillion dollars.  We are on target to have annual trillion dollar budget deficits for as far as the eye can see, and this is assuming no wars or no major recessions.  One can only assume that the fiscal policy of this nation is code-named mene mene tekel upharsin.





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  1. Once more with feeling. Harry Truman once recalled that when he was sworn in as a Senator, he said to himself ‘I can’t believe I got here”. He said that six months later, contemplating some of his colleagues, he said to himself, “I can’t believe they got here”. The next set of cohorts down in the U.S. Senate, in conjunction with the House and the President, accomplished a rapid demobilization during the period running from September 1945 to March 1947 (and recall, please, that 1/3 of gross domestic product was devoted to the military during the period running from 1940 to 1946, and about 6.5% from 1946 to 1950) and turned in balanced budgets for the fiscal years concluding in 1948 and 1949. The people he couldn’t believe had got there were two cuts above the clown car denizens who are there now.

  2. The US does not have too much debt. How do I know? Because people keep buying 10-year Treasuries with a yield of 2.77%. Given an inflation rate of around 2%, they are prepared to lend the government money for next to nothing.

  3. The US is in terrible fiscal shape MPS. It simply is the case that most of the rest of the world is in worse fiscal shape and the US controls the currency that dominates the global economy.

  4. “[T]he US controls the currency that dominates the global economy.”

    And the currency is only another form of Government debt.

    The only difference between a bond and a currency note is that the latter are issued in smaller denominations and pay no interest to the holder.

  5. And the currency is only another form of Government debt.

    No it isn’t.

    I’ve forgotten who it was who was asked how he’d gone bankrupt. First slowly, then very rapidly. The loss of confidence in your promissory notes can be astonishingly rapid. There really is no good reason to undertake debt financing of anything absent a war of general mobilization (of which there’s been none since 1945 and no situation so resembling since 1953), a banking crisis (of which there has been one since 1933), or the sort of small shortfall you have during a recession year (we haven’t confined our deficits to recession years since the Borgia Kennedy brothers came to town).

  6. the US controls the currency that dominates the global economy.

    Until the Yuan shoves it aside. We’ll still have debts denominated in our own currency (as does Japan and, I believe, the UK), but China’s up and coming and will soon have production levels greater than ours. Hope their in a more congenial frame of mind than great powers past.

  7. I think Chinese economic supremacy will last about as long as Japanese economic supremacy. China has a huge problem with political instability and a political leadership with no ideas other than force to control a nation that has traditionally had regular huge civil wars, followed by periods of fragmentation. I think the Communist Dynasty will be lucky to see 2030.

  8. China is also facing a demographic storm like no one’s business. In 2010 their 18-22 age cohort was 110 million, but by 2020 that same group will drop to 65 million. I have no 2030 projection, but it’s likely under 50 million. That’s your college students, young entrepreneurs, workers and of course soldiers. You can’t draft all of ’em and have an economy, and you can’t have everybody producing and field an army big enough to take on serious expansion.

  9. Japan due to its dimensions was never going to be economically supreme. Its boosters 35 years ago were expecting perhaps that it would displace the United States as the world’s most affluent large country and were speaking as if was already on the technological vanguard in manufacturing. The notion that Japanese growth derived from rapid assimilation of technology developed elsewhere was a minority view, and I’m not sure anyone saw the demographic bomb coming (perhaps some academics did, or Ben Wattenberg).

    China has fertility problems, about as bad as Europe-in-General, though not as bad as the rest of the affluent Far East. However, just ending legal harassment of couples who want more children might suffice to improve matters. Other countries have had a fertility recovery in recent decades, Russia, France, and Britain notable among them, so I wouldn’t rule out the possibility China will.

    I suppose China could suffer catastrophic political breakdown. OTOH, there is a precedent for continental warfare in Europe with 8 digit death tolls. Not sure how to evaluate the comparative probability of these scanarios.

    China has had a great deal of liberalization over a period of 40-odd years, so its political order is not static. Recent developments are disconcerting. They seemed up until a few years ago to have developed a system of mandatory retirements so party and state positions were occupied by people in their sixties who would be headed out to grass in a few years. Now they seem to be regressing. I’d point out that the regime in Singapore has survived without incident since 1959. Very different scale, of course, but I’m not sure there’s ever been a regime quite like China’s. Mexico under the PRI, perhaps, bar that China’s economic performance is much better and the country has low crime rates.

  10. “And the currency is only another form of Government debt.

    No it isn’t.”

    That is true. The Government will not repay.

    Take out a piece of US (fiat – not backed by gold or the US Government) currency. Look at the side with the president’s portrait. The embossed words above THE UNITED STATES OF AMERICA,’ say, “FEDERAL RESERVE NOTE.”

    Then, in small letters it is embossed, “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.” N.B. It does not say “backed by the full faith and credit of the United Sates Government.” For whatever that could be worth.

    One post-modern economic theory is that currency has value because the government (organized brigandage) accepts it in payment of taxes (confiscation/theft).

    In 1933, they confiscated we-the-people’s money (gold coinage). But, FDR and his gangsters overlooked the fact that each Federal Reserve Note had embossed on it “Will Pay To The Bearer ## Dollars.” (I have one each ten and one each twenty dollar, 1934 FR Note embossed with the offensive wording.)

    Prior to 1993, FR Notes were bearer notes (debts/loans) payable on demand by the Fed, which held gold coins based on a percentage of outstanding notes.

    In 1934, Congress (Twain: the only distinctly American criminal class) made the gold money confiscation “legit” and the gang removed the offensive language.

    That’s neither here nor there. Skyrocketing annual deficits and concomitant, unsustainable increases in the national debt are high among the gravest threats confronting our Republic and many other developed/lesser developed countries,

  11. It’s a medium of exchange, a store of value, a unit of account. It’s not a claim on any particular assets. We do not need a gold standard nor an updated equivalent like a currency board and our last experience with such a system eventually proved disastrous in this country and in continental European countries which remained wedded to gold.

    We’re not running up the debt due to our monetary system. We’re running up debt because our lousy politicians Just.Don’t.Feel.Like equalizing expenditures and revenues. This is the legacy of, among others, AM McConnell and Paul Ryan. You have tools like Jonah Goldberg writing encomiums to them without asking what they managed to accomplish with that congressional majority handed to them 3 years ago. The last fiscal year under the supervision of Messrs. Bush, Frist, and Hastert had a deficit of (IIRC) 1.2% of domestic product.

  12. Art Deco, any break down of ethnicities/religions in the fertility recoveries of Russia, France and Great Britain ? Just curious as all three countries have sizeable growing Muslim minorities.

  13. people keep buying 10-year Treasuries

    My understanding is that most of those “people” is China. Propping up their biggest customer maybe? What happens if – when – customer and vendor get cross-ways?

  14. “My understanding is that most of those “people” is China. Propping up their biggest customer maybe? What happens if – when – customer and vendor get cross-ways?”

    China owns about 19% of our debt, not their wisest investment if they decide to pick a fight with us.

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