Some numbers, large numbers
The country’s finances are not in good shape on this Independence Day. David R. Burton and Cesar Conda express a little concern over the Obama economic policy in a Washington Times piece called why stagflation is coming:
The monetary base (coins, currency and bank reserves) has doubled over the past year. It is increasing at a rate 12 times the average since 1981. M1 (the monetary base plus checking deposits) increased last year by roughly 16 percent, a near record and three times faster than average since 1981. M2 (M1 plus most savings deposits and money market funds) increased 9 percent in the past 12 months (a rate more than 50 percent higher than the average since 1981)…
fiscal 2009 federal outlays were $3,938 billion compared to $2,983 billion in fiscal 2008 — a 34 percent increase in one year. Federal spending has grown from 21 percent to 28.1 percent of gross domestic product in only one year. Only during the last three years of World War II has federal spending been a larger share of the economy.
These figures understate the degree to which federal spending and credit creation have increased because various federal entities have guaranteed something on the order of $10 trillion to $12 trillion in private debt…An economic train wreck is coming.
Jonah Goldberg weighs in on the stimulus that does not stimulate:
we’re now stuck with some of the most absurdly counterproductive legislation imaginable. The national debt is growing faster than the GDP. According to the Congressional Budget Office, within 10 years Uncle Sam’s publicly held debt will double to 82 percent of GDP. The CBO predicts that by 2038, our debt will be 200 percent of GDP. Debt siphons off growth for the simple reason that dollars go to paying it off rather than investing in something productive.
Meanwhile, thanks to ongoing trade deficits and relentless borrowing, America’s financial status is deteriorating rapidly. The Commerce Department reported last week that the value of foreign assets owned by Americans is $19.89 trillion, while the value of American assets owned by foreigners is $23.36 trillion. In other words, we are a “net debtor” to the tune of $3.47 trillion. That represents a 62 percent increase over 2007. Foreigners, most significantly China, own nearly 50 percent of our government’s public debt.
Don’t worry. Be happy. As we said a while ago, Obama has inaugurated Dependence Day.
It appears that the political class is too corrupt or too irresponsible to govern. Worse, it appears that a majority of the citizens of the US are either too fat and lazy or too uneducated and ignorant of basic bookkeeping to prevent the fiscal disaster that looms just over the horizon.
July 5th, 2009 at 11:54 am
After a long time reading your comments and agreeing with you, the question stands. What do we do about it?
Personally and for my business. Is it going to be inflation with all of this worthless paper money printed, or it going to be deflation with all of the wealth and demand that was and is being destroyed?
I am a farmer at probably the top of my game. I’ve finaly have some stability and equity after 33 years of making payments and being very careful with money. Now instead of hoping I can pay off loans I worry that it will be the government that will make the wrong decision and leave my family with nothing.
Is cash king or will inflation make any hard assets, and therby loans to buy, cheap as in the ’70s, or is this 1982 and bad things are in store?