He went to G20 to ask all major nations to borrow and stimulate. If everyone in the world does this at the same time, who lends to them? Fact is we have to borrow $1T in the next 4 months and the major sources (China, Russia, Middle East) are selling not buying. Bernanke had no choice but to pursue Quantitative Easing, which means the Federal Reserve prints money to finance the deficit, since the Fed is the only lender left.
We got away with this in WWII by forcing US citizens to save a huge % of their earnings as part of a war effort. Instead this time Obama wants the American consumer to spend spend spend and not save.
The numbers do not add up. It is as if Obama is living in an academic fantasyland where he can apply Keynesian stimulus and Monetarist easing at the same time, whereas both schools thought their approach were mutually exclusive. You do both and you blow up the economy into hyperinflation.
Then his plan for balancing the horrific deficits is to nationalize healthcare. Let's see, increase coverage, increase benefits, encourage usage - and overall costs go down??
This is utter nonsense. Even his own budget does not swallow this tripe: it has a $600B "down payment" increase in healthcare for his plan. The CBO doubles that. That extra $1.2T is NOT included in the deficit projections in this chart. The deficit stretches out, widening in the out years - a completely untenable and irresponsible situation.
UPDATE 5/31: John Taylor, the respected economist from Stanford, has calculated how bad an inflation will be needed to get deficits back in line:
To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?
Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.
[An] 100 per cent inflation would, of course, mean a 100 per cent depreciation of the dollar. Americans would have to pay $2.80 for a euro; the Japanese could buy a dollar for Y50; and gold would be $2,000 per ounce. This is not a forecast, because policy can change; rather it is an indication of how much systemic risk the government is now creating.
To summarize, we either need to raise taxes 60%, or debase the USD in half. Both are disasters for the US economy. Or, we could wake up and cut spending!
We got into this pickle because Obama is over his head. He thinks like a Community Organizer: how to shake down "The Man" for goodies for his constituents. I guess that is all he knows, since that is all he ever did. But now he is The Man! So he is shaking down himself! Which means, the rest of us. He will soak the innocent and the prudent to take care of the hucksters and the reckless, and bring down the US Global Economy in the process.
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