The Fed Opts for Suicide

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Have a look at the US Debt Clock, which informs us that US national debt is just a hair under $20 trillion and growing by the second. US total debt now stands at more than $825,000 per family. Yup, that's unsustainable.

As reported by The New York Times in a lead article entitled "Trump Wants Faster Growth. The Fed Isn’t So Sure." by Binyamin Appelbaum:

"Mr. Trump and Janet L. Yellen, the Fed’s chairwoman, appear to be headed toward a collision, albeit in slow motion. Mr. Trump has said repeatedly that he is determined to stimulate faster growth while the central bank, for its part, is indicating that it will seek to restrain any acceleration in economic activity.

On Wednesday, the Fed plans to make a first move in the direction of restraint. The central bank has all but announced that it will raise its benchmark interest rate at the conclusion of a two-day meeting of its policy-making committee."

Raise interest rates and slow the economy? Not a bad idea if national debt was significantly less than $20 trillion; however, given what it is, higher interest rates mean a slowing of US government income from taxation and higher amounts of interest to be paid on American debt, thereby compounding the problem.

Plain and simple, the Fed has opted for suicide.

Maureen Dowd, "White House Red Scare": Pre-Traumatic Stress Disorder

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You can usually count on Maureen Dowd for a few laughs, at least when she's not visiting Saudi Arabia, and in her latest New York Times op-ed entitled "White House Red Scare," she doesn't disappoint. Informing us that with the advent of Trump, Washington "is suffering pre-traumatic stress disorder,"Dowd observes:

"Can you imagine a scenario where two Republicans in a row lose the popular vote but win the White House with a shady helping hand? Can’t the G.O.P. win fair and square? Was it the Russians who turned Wisconsin, Michigan and Pennsylvania truly red?"

And all this while, I thought it was Comey.

The Russians turned Wisconsin, Michigan and Pennsylvania? Nah. In fact, I think it had more to do with the fact that only 11 percent of voters thought Hillary was honest and trustworthy. Or stated otherwise, the Republican party all but gave the Democrats the election by nominating Trump, but the Democratic leadership dropped the ball.

Speaking of balls dropping, did you happen to be in Times Square on New Years Eve and watch the ball drop? I wasn't there. You see, I'm waiting for another ball to drop, and sorry, progressives, it has absolutely nothing to do with my advancing age.

Do you recall Obama telling us on July 3, 2008:

"The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents - #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back -- $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic."

Well, America's national debt now stands at $19.94 trillion (more than $61,000 for every man, woman and child), and it is rising by the second. When does it hit $20 trillion? Any day now, and when that ball drops and the US dollar effectively becomes toilet paper, we can silently watch as Washington bureaucrats, who should be suffering from "pre-traumatic stress disorder" from this one Obama legacy that can't be voted away, attempt to paper over the mess.

David Brooks, "The Epidemic of Worry": Rational Coulrophobia

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In his latest New York Times op-ed entitled "The Epidemic of Worry," David Brooks informs us:

"The election campaign isn’t really about policy proposals, issue solutions or even hope. It’s led by two candidates who arouse gargantuan anxieties, fear and hatred in their opponents.

As a result, some mental health therapists are reporting that three-quarters of their patients are mentioning significant election-related anxiety. An American Psychological Association study found that more than half of all Americans are very or somewhat stressed by this race."

Of course, Brooks has a solution:

"[T]he answer to worry is the same as the answer to fear: direct action. If the next president starts enacting a slew of actual policies, then at least we can argue about concrete plans, rather than vague apocalyptic moods."

Yeah, right. I can't wait to see "a slew of actual policies" of the kind enacted by Obama, e.g., the Affordable Care Act (Who cares if US health care costs are to increase by 25 percent next year?) and the unsigned nuclear deal with the crazy mullahs (Who cares if Iran is now firing missiles at the US Navy and John Kerry is receiving a prize for this "achievement"?), and to start arguing about them.

However, more to the point, as observed by Paul Volcker and Peter Peterson in an October 21, 2016 New York Times op-ed entitled "Ignoring the Debt Problem":

"[T]he deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.

Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war.

. . . .

Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support.

It’s not just federal spending that would be squeezed. The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector’s capacity to save, to finance industry and home purchases, and to invest abroad.

Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the 'kindness of strangers' [China?] who may not be so kind as the I.O.U.s mount up."

Indeed, America's debt is unsustainable, and neither candidate has provided answers to this problem.

Don't worry? In fact, Americans should be quaking in their boots. This is indeed an instance in which coulrophobia, the fear of clowns, i.e. Hillary and Donald, is entirely rational.

Paul Krugman, "Time to Borrow": Living on Borrowed Time

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Just in case you were wondering, I was unable to attend Obama's 55th birthday party owing to a bout of nausea, which came on after I learned that Barry had funded Iranian terror with a planeload of $400 million in Swiss francs, euros and assorted other currencies.

Onward and upward ... not.

In his latest New York Times op-ed entitled "Time to Borrow," Paul Krugman says of Hillary:

"The campaign still has three ugly months to go, but the odds — 83 percent odds, according to the New York Times’s model — are that it will end with the election of a sane, sensible president."

Someone who thinks she came under sniper fire in Bosnia is sane and sensible? Someone perpetuating a "marital" relationship with Bill, a serial lech, is sane and sensible? A four-Pinocchio compulsive liar is sane and sensible? Yes, I know, it's all relative ...

But Paul's opinion piece is not about Hillary. Rather, he is again demanding that the US take more debt upon itself:

"[I]nvesting more in infrastructure would clearly make us richer. Meanwhile, the federal government can borrow at incredibly low interest rates: 10-year, inflation-protected bonds yielded just 0.09 percent on Friday.

Put these two facts together — big needs for public investment, and very low interest rates — and it suggests not just that we should be borrowing to invest, but that this investment might well pay for itself even in purely fiscal terms. How so? Spending more now would mean a bigger economy later, which would mean more tax revenue. This additional revenue would probably be larger than any rise in future interest payments."

Fascinating. But now consider what the nonpartisan Congressional Budget Office wrote in its July 2016 Long-Term Budget Outlook:

"If current laws governing taxes and spending did not change, the United States would face steadily increasing federal budget deficits and debt over the next 30 years, according to projections by the Congressional Budget Office. Federal debt held by the public, which was equal to 39 percent of gross domestic product (GDP) at the end of fiscal year 2008, has already risen to 75 percent of GDP in the wake of a financial crisis and a recession. In CBO’s projections, that debt rises to 86 percent of GDP in 2026 and to 141 percent in 2046—exceeding the historical peak of 106 percent that occurred just after World War II. The prospect of such large debt poses substantial risks for the nation and presents policymakers with significant challenges.

. . . .

A large and continuously growing federal debt would make a fiscal crisis in the United States more likely. Specifically, investors might become less willing to finance the government’s borrowing unless they were compensated with high interest rates. As a result, interest rates on federal debt would abruptly become higher than the rates of return on other assets, dramatically increasing the cost of future government borrowing. In addition, that increase would reduce the market value of outstanding government bonds. If that happened, investors would lose money. The potential losses for mutual funds, pension funds, insurance companies, banks, and other holders of government debt might be large enough to cause some financial institutions to fail, creating a fiscal crisis.

. . . .

If a fiscal crisis occurred in the United States, policymakers would have only limited—and unattractive—options for responding. The government would need to undertake some combination of three approaches: restructure the debt (that is, seek to modify the contractual terms of existing obligations), use monetary policy to raise inflation above expectations, and adopt large and abrupt spending cuts and tax increases."

Or stated otherwise, notwithstanding Krugman's "what me worry" attitude, the US is living on borrowed time.

Paul Krugman, "Cheap Money Talks": Borrow, Baby, Borrow!

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Telling us just how low interest rates have become in his latest New York Times op-ed entitled "Cheap Money Talks," Paul Krugman would again have the US take on more debt:

"Meanwhile, there are huge unmet demands for public investment on both sides of the Atlantic. America’s aging infrastructure is legendary, but not unique: years of austerity have left German roads and railways in worse shape than most people realize. So why not borrow money at these low, low rates and do some much-needed repair and renovation? This would be eminently worth doing even if it wouldn’t also create jobs, but it would do that too.

I know, deficit scolds would issue dire warnings about the evils of public debt. But they have been wrong about everything for at least the past eight years, and it’s time to stop taking them seriously."

All fine and good were it not for the fact that America's national debt now stands at some $19.4 trillion. Or stated otherwise, Obama and friends have effectively bankrupted the US. Do you remember how Obama declared in 2008:

"The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic."

Well, US debt now amounts to $60,000 "for every man, woman and child." That's irresponsible. It's unpatriotic. More to the point, it's unsustainable.

It hasn't exploded over the past eight years? Well, all bad habits ultimately catch up with you. It's only a matter of time.

Money is cheap? So are drugs, when the pusher tries to get you addicted.

What happens afterwards, when interest rates ultimately go up, and the US is forced to pay the piper? As already noted, US debt is not sustainable, and the world should expect a sorry awakening.

Paul Krugman, "A Pause That Distresses": Don't Panic?

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A mere month ago, in a New York Times op-ed entitled "The Diabetic Economy," Paul Krugman wrote from Lisbon:

"Things are terrible here in Portugal, but not quite as terrible as they were a couple of years ago. The same thing can be said about the European economy as a whole. That is, I guess, the good news.

The bad news is that eight years after what was supposed to be a temporary financial crisis, economic weakness just goes on and on, with no end in sight. And that’s something that should worry everyone, in Europe and beyond."

However, according to Paul, everything was hunky-dory in the US:

"Meanwhile, the overall economic and political situation in America gives ample grounds for hope, which is in very short supply over here."

Well, today, in a Times op-ed entitled "A Pause That Distresses," Krugman seems to have changed his tune. Labelling Friday’s employment report "a major disappointment," Krugman tells us:

"Should this pause worry you? Yes. Because if it does turn into a recession, or even if it goes on for a long time, it’s very hard to envision an effective policy response."

Krugman nevertheless proposes:

"For the simplest, most effective answer to a downturn would be fiscal stimulus — preferably government spending on much-needed infrastructure, but maybe also temporary tax cuts for lower- and middle-income households, who would spend the money. Infrastructure spending makes especially good sense given the federal government’s incredibly low borrowing costs: The interest rate on inflation-protected bonds is barely above zero."

Ah yes, infrastructure spending and tax cuts, which would all be well and fine if Obama had not taken American's national debt to an unsustainable $19.3 trillion, amounting to some $60,000 of debt per citizen or more than $161,000 per taxpayer.

Did you happen to see the movie "The Big Short," which tells the stories of those who foresaw the collapse of collateralized debt obligations, which in turn brought the American economy to its knees in 2008? In fact, the American economy is also teetering, but no one wants to acknowledge it.

Paul Krugman, "Who Hates Obamacare?": Krugman Trashes Bernie Sanders

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In a New York Times op-ed entitled "Who Hates Obamacare?," Paul Krugman again makes the case for Obamacare, while taking a swipe at Bernie Sanders. Krugman writes (my emphasis in red):

"[H]ealth costs have risen much more slowly than before.

. . . .

The number of uninsured Americans has dropped sharply, especially in states that have tried to make the law work. But millions are still uncovered, and in some cases high deductibles make coverage less useful than it should be."

Health care costs have risen much more slowly? Krugman provides a link to a September 2015 White House press release subtitled "Summary: New data show that slow growth in health care costs is continuing in 2015." Needless to say, Krugman is careful not to observe, as reported in December 2015, that Obamacare premiums will rise by an average of some 13 percent in 2016. Nice try, Paul.

Obamacare coverage is "less useful" than it should be? Oh really? How about "useless," owing to deductibles, as reported by The New York Times?

Re Sanders, Krugman goes on to say:

"And speaking of demonization: One unpleasant, ugly side of this debate has been the tendency of some Sanders supporters, and sometimes the campaign itself, to suggest that anyone raising questions about the senator’s proposals must be a corrupt tool of vested interests.

. . . .

The truth is that whomever the Democrats nominate, the general election is mainly going to be a referendum on whether we preserve the real if incomplete progress we’ve made on health, financial reform and the environment. The last thing progressives should be doing is trash-talking that progress and impugning the motives of people who are fundamentally on their side."

But let's leave progressive politics, "hate" and "trash-talking" out of the picture for a moment. Instead, consider Robert Samuelson's January 31, 2016 Washington Post opinion piece entitled "The dangerous deficits our candidates aren’t talking about," in which we are told:

"Last week, the nonpartisan Congressional Budget Office (CBO) issued its annual 'Budget and Economic Outlook' report — a detailed examination of White House and congressional policies — and hardly anyone paid heed. The inattention is striking because the report was full of sobering news.

Consider:

●Cumulative deficits over 10 years (2016 to 2025) are now projected at $8.5 trillion, up from a $7 trillion estimate in August. Federal debt held by the public — the total of all past deficits — is projected at $22.4 trillion in 2025; in 2016, it’s $13.9 trillion. By 2025, the debt would equal 84 percent of the economy (gross domestic product) compared with 74 percent in 2015. Many economists think the rising debt unsustainable.

●Almost half the spending growth over the decade comes from two programs: Social Security and Medicare. Much of the rest stems from other health-care programs (Medicaid, the Affordable Care Act) and from interest on the debt."

Samuelson's conclusion:

"The leading [presidential] candidates are playing Russian roulette with the nation’s future, assuming that deficits can be ignored because most Americans (or so it seems) would prefer it that way."

Allow me to summarize the foregoing in simple English: America is sinking into an ocean of red ink from which it will never emerge, and Obamacare is one of the chief culprits. As for me, I couldn't give a damn if Hillary or Bernie is more "progressive."

David Brooks, "The Brutalism of Ted Cruz": America in Better Economic Shape Than Any Other Major Nation?

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In his latest New York Times op-ed entitled "The Brutalism of Ted Cruz," David Brooks savages what he terms Cruz's "pagan brutalism." Along the way, Brooks also comes to the defense of the Obama administration:

"America is in better economic shape than any other major nation on earth."

Oh really? Unbeknownst to David, there are now countries with better credit ratings than the US. Moreover, my guess is that if the major credit rating countries were not concerned with being blamed for revealing that the emperor has no clothes, thereby potentially setting off worldwide economic chaos, America's credit rating might be pegged one or two levels lower.

But more to the point, consider America's debt-to-GDP ratio, which at some 103.8% is among the highest among developed countries, only better than that of Japan, Greece, Italy, Portugal, Ireland, and Belgium.

Brooks obviously does not shine in economics.

Hillary Berates Obama for America's Staggering National Debt

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Speaking last week in Keota, Iowa, Hillary declared:

"When you - When you - Something is not broke, don’t break it. Right?

And this school district and these schools throughout Iowa are doing a better-than-average job. Now, I wouldn’t keep any school open that wasn’t doing a better-than-average job."

Of course, everyone seized upon the fact that Hillary was calling for the closure of half of Iowa's schools, but what about, "Something is not broke, don’t break it"? I can only understand this to mean that Hillary was berating President Obama for allowing America's debt to rise to an unsustainable $18.8 trillion, or more than $157,000 per taxpayer.

A bit like Hans Christian Andersen's "The Emperor's New Clothes." When does the world wake up to the fact that America is indeed broke and requires "fixing"? And this begins with Obamacare. As the Chicago Tribune observed on Christmas:

"[T]he next president and Congress have no choice but to fix Obamacare, a law now known for rocketing premiums, narrowing networks of coverage, flummoxed consumers and insolvent insurers."

Good luck!

Paul Krugman, "Debt Is Good": In for a Penny, in for a Pound!

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US national debt is fast approaching an unsustainable $18.3 trillion, amounting to more than $57,000 for every American man, woman and child. This compares with some $30,000 for every man, woman and child in America in June 2008, which, at the time, elicited presidential candidate Obama's declaration:

"That's irresponsible. It's unpatriotic."

Well, $57,000 per American is not good enough for Paul Krugman, who, in his latest New York Times op-ed entitled "Debt Is Good," would have us know:

"Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

. . . .

One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation."

From whom should the United States be borrowing? More money should be borrowed from China, which is currently mired in its own set of economic problems? As reported by Reuters in an article entitled "Sharp China factory slowdown in August raises global growth fears" by Koh Gui Qing:

"Following three decades of blistering double-digit economic growth, Chinese authorities have had limited success in shoring up activity this year despite four interest rates cuts since November.

Worse, last week's shock 2 percent devaluation in the yuan and a near-collapse in Chinese shares over the summer that was countered by a massive stock market rescue do not appear to have calmed investor jitters.

The yuan has slid nearly 3 percent since its Aug. 11 devaluation, a fall that some analysts say is too modest to boost Chinese exports, but notable enough to raise fears of competitive currency devaluations between governments."

And while China is busy devaluing the yuan, the Federal Reserve might soon be raising interest rates in the US, i.e. a paradox which is certain to further increase the outrageous trade imbalance between China and the US.

More debt? I don't think so, unless someone is truly intent upon doubling down on a bad bet at the economic roulette wheel.

Paul Krugman, "G.O.P. Candidates and Obama’s Failure to Fail": Aren't You Forgetting $18.3 Trillion of Debt, Paul?

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Referring to the recent Republican presidential candidate debate, Paul Krugman declares in his most recent New York Times op-ed entitled "G.O.P. Candidates and Obama’s Failure to Fail":

"What did the men who would be president talk about during last week’s prime-time Republican debate? Well, there were 19 references to God, while the economy rated only 10 mentions. Republicans in Congress have voted dozens of times to repeal all or part of Obamacare, but the candidates only named President Obama’s signature policy nine times over the course of two hours. And energy, another erstwhile G.O.P. favorite, came up only four times.

Strange, isn’t it? The shared premise of everyone on the Republican side is that the Obama years have been a time of policy disaster on every front. Yet the candidates on that stage had almost nothing to say about any of the supposed disaster areas.

And there was a good reason they seemed so tongue-tied: Out there in the real world, none of the disasters their party predicted have actually come to pass. President Obama just keeps failing to fail."

Obama has failed to fail? How about judging him according to his own standards? On July 3, 2008, Obama stated:

"The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents - #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back -- $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic."

Well, US national debt has now reached an unsustainable $18.3 trillion, amounting to more than $57,000 for every American man, woman and child. Care to comment, Paul? Oh, that's right, I forgot: Debt, even of the unsustainable kind, is good.