That's what a fellow named Kenkoocksam (doesn't he look faintly familiar?) wrote on Yahoo. Personally, I had given up on Yahoo, and apparently the feeling is mutual, because I wrote a reply but it doesn't show up. Which is really curious, as the reply does exist, but it's hidden from my view (at least) for mysterious reasons only known to Yahoo.
Anyway, here is the reply in full:
Kenkoocksam: [Obama is bankrupting the country.]
He might have done a lot of things you (or even I) don't like, but bankrupting the country isn't one of these.
Go to the CBO, they have a nice graph with the sources of the deficit. You'll be quite surprised..
He might have done a lot of things you (or even I) don't like, but bankrupting the country isn't one of these.
Go to the CBO, they have a nice graph with the sources of the deficit. You'll be quite surprised..
(click to enlarge)
Then go to today's Financial Times and read Richard Koo's article titled ["Explain the disease to help US citizens"]. Koo has studied Japan for 20 years Japan suffered from a similar crisis (but 3x the size) in the early 1990s and he explains in the article why public deficits are necessary when the private sector (households and firms together) is a net saver (to the tune of 8% of GDP, as it happens now in the US. The article is also available on SHU for easy reference, under 'economy'
.Before dismissing Koo out of hand, you might wanna realize that his model explains (ex-ante, that is, predicted):
- the powerlessness of monetary policy (the private sector is paying off debt despite zero interest rates)
- record low bond yields despite record high public deficits and debts (there is simply excess saving in the private sector)
- non-existent acceleration in inflation despite large QE (no inflation in UK, US, even deflation in Japan itself).
- how Japan, despite suffering from a financial crash 3x the size of US 1929 or 2008, managed to never experience a depression (apart from when they moved prematurely to austerity in 1997)
Compare that with, say, the WSJ editorial page or IBD, who have routinely hyperventilated about rising bond yields or hyperinflation around the corner since 2009, and have still not grasped the essence of what Koo explains is quite simple. When private sector balance sheets are ravished ($9T wiped off due to a 40% fall in house prices) and they react by increased saving, reduced spending, someone somewhere has to spend MORE to keep the economy from falling in the type of debt-deflationary cycle that wiped off 46% of GDP in the US between 1929 and 1933. See what that does for the debt/GDP ratio..