The mother of all stress tests....

[Tim Liston]

The government has recently completed “stress testsâ€

[Bill Call]

[quote="Tim Liston"]
My thinking is that there really is only one possible outcome. Because we will not proactively and voluntarily ratchet back our economy and standard of living, we will instead borrow and print the money we need to meet expenses as they come due. That of course will eventually lead to higher interest rates and inflation. Inflation will “solveâ€

[Tim Liston]

Bill it's not really Obama's fault. He's just giving us what we want generally as a society, at least for now, until reality finally smacks us in our collective face and we figure it out. Unfortunately, you don't get elected by telling folks that their lifestyle is unsustainable that and we have to ratchet back.

Tying in with that other thread, and contradicting you for a change, we are all about bigger and newer everything, and maximum convenience. And no money down. To achieve this we have taken on debt at every level: personal, corporate, government. And we have promised entitlements far into the future. Not only is it not sustainable but we have well overshot. By some estimates by as much as $60 trillion dollars.

We can't fix the economy until we either pay off much of the debt, or repudiate it. And to the extent that Obama (1) continues to add to the debt, and (2) is not helping us recognize the reality of what we face and guiding us through the process of addressing it, yes it is his fault. But it is more our fault for demanding all those bigger, newer things, and allowing so much debt to be created.

To be honest I'm pretty confused about this financial situation. On the one hand I can't imagine how we can continue borrowing and spending and not create inflation. And understanding as I do that inflation is a really good way to repudiate debt, how can it not be coming our way? But there are those who say that given how dead in the water our economy is, given the need to repay debt and the “paradox of thriftâ€

[michael gill]

And therein lies a big political problem:

Republicans get all kinds of mileage talking about how the government needs to live within its means. They refuse to translate this thinking to consumers, because, as you note, Tim, no one gets any mileage telling the population to live within its means. In fact, companies that make consumer products, including consumer loans, make their money by encouraging people not to.

[ryan costa]

is it any worse than Reaganomics?

what is the ratio of growth of debt to annual federal budget?

I had heard it reported somewhere the Stimilus Bill appropriated money for spending over a period of 7 to 9 years. Appropriations aren't real money. that averages to less than additional 80 billion of spending a year.

[Tim Liston]

It is laughable that the Treasury issues bonds and the Fed prints money to buy them. How can there be any surer way to create inflation? And just what does that really accomplish, other than to permit the government to continue spending?

This is what countries that are in trouble normally do; this is exactly what Zimbabwe is doing, what Argentina did before it collapsed and what a host of other nations whose currencies lost up to 90% of their original value have done in the past.

Sound familiar? It's from this article published yesterday.

The article gives some advice for investing in the face of inflation (currency collapse). It also predicts the collapse of the medical industry.

[Bill Call]

Bill it's not really Obama's fault. He's just giving us what we want generally as a society, at least for now, until reality finally smacks us in our collective face and we figure it out. Unfortunately, you don't get elected by telling folks that their lifestyle is unsustainable that and we have to ratchet back.

Good point.

Some commentators have said that the defeat of the California ballot issues was a victory for conservatism. It wasn't. It was a victory for adolescent democracy. The people of California have stood by and or supported huge increases in spending but have refused to pay for it.

Adjusted for inflation and population increases the State spends twice as much as it did 30 years ago and by every measure California is worse off.

[ryan costa]

the size of the "stimulus bill" isn't that great in historical contexts.

If Reagan introduced the exact same amount of spending we wouldn't have had the "tea party" charade a few weeks back. Reagan could have said, "I'm going to spend 700 billion dollars on nuclear weapons, space lasers, R & D for the Bradley Fighting Vehicle, Chile, and South Africa.

The inflation of the early 70s was a consequence of the rising requirements of living, and financing Viet Nam and the Cold War through loopy methods. more and more families needed two cars or more. more and more kids needed bus rides to school. we had to stretch sewers and electricity all over.

Spending/borrowing was much higher in the 30s and 40. what was the difference? we were an industrialized nation then, and Earl Butz hadn't marginalized agriculture. borrowing was put into enterprises producing infrastructure and goods we consume, before we hit the negative-returns on gains in efficiency threshhold.