Posted: Sun Oct 23, 2016 9:10 pm Post subject: Issues in the American economy
Paul Volcker Explains Why The Fed Can't Raise Rates
by Tyler Durden
Oct 23, 2016 7:18 PM
In an op-ed posted by Paul Volcker and Peter Peterson in the NYT, the two financial titans start off by pointing out just how "strange" the current presidential campaign is in its historical context...
Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one. Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy.
... but the main issue that troubles the two financial titans, is the lack of any practical discussion of the soaring US debt during the entire bizarre campaign - the one issue both agree is the biggest challenge facing the US economy today:
Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the 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.
That staggering number has been ignored by most, and certainly the Obama administration, which has been glad to take credit for a sputtering "recovery" while ignore what caused it.
Unfortunately for Obama, just last week it was revealed that none other than the chair of the Democratic Party, Donna Brazile, was "peddling fiction" when the head of the DNC admitted to John Podesta that the "people are more in despair about how things are - yes new jobs but they are low wage jobs... HOUSING is a huge issue. Most people pay half of what they make to rent.”[bolding in original]
I have been thinking -- since 2008 -- that the crisis would hit when the Fed went back to market interest rates, but now I realize that was an error. The Fed cannot raise interest rates because the interest cost would be a budget disaster.
Which is a disaster, because it means present trends will continue into the future, particularly if Hillary wins. That trend has seen the national debt double every eight year, going back to George W Bush. Bush started his term with about $4 trillion in debt, but it was $9.5 trillion when he left office. Obama has doubled that to about $20 trillion. Hillary is promising to 'do something' about the student loans, which will be a $trillion or so alone.
It seems to me that Canadian Conservatives feel uncomfortable discussing economic issues. I hope I'm wrong becasuse this is a ticking time-bomb.
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