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| https://www.youtube.com/watch?v=kDz_9kfrcFk |
Like a bunch of Yahoos with a pile of wood and a 5 gallon jug of gasoline, Trump and the Republican Congress are ignoring the deficit and pushing for more economic growth when it is obvious that we are already close to full employment.
The important fact that they are ignoring is that we already have over $20 trillion in debt that needs to be periodically refinanced.
Currently, the interest rate on the 10 year bond is below 3% (but climbing quickly), which means that we *only* have to divert about $580 billion a year to service this debt.
But, what if interest rates on the 10 year bond rise to 9%, as they did in the wake of Ronald Reagan's tax cuts in the 1980's? That $580 billion becomes $1.8 trillion in interest payments alone.
The 2015 federal budget was $3.8 trillion, so interest payments of $1.8 trillion would be over half of the federal budget.
Of course, that is not something that the economy can bear, so the Federal Reserve will have to issue additional debt instruments to bridge the gap, which will force them to offer ever higher interest rates, creating a death spiral that will destroy the dollar and the U.S. economy.
What our democratically elected leaders fail to understand is that a nation must take on debt in times of crisis and war, and repay that debt in times of growth.
The Republican bet in this case is that we can grow out of our deficits, but with an additional $1 trillion in deficits already forecast for 2019 (and each subsequent year), the economy would have to grow by $11 trillion (based on a current GDP of about $20 trillion) to bring in the additional revenue to make up the shortfall and balance the budget.
Do we really think we can more than double U.S. economic output over the next four years? That implies an annual growth rate of over 20%.
Here is the historical GDP growth data in the post-WWII period:
We've never done it before, but who knows....
In any event, when hyper-inflation hits it will make repayment of the debt MUCH, MUCH EASIER, as inflation will reduce it down to almost nothing.
The important fact that they are ignoring is that we already have over $20 trillion in debt that needs to be periodically refinanced.
Currently, the interest rate on the 10 year bond is below 3% (but climbing quickly), which means that we *only* have to divert about $580 billion a year to service this debt.
But, what if interest rates on the 10 year bond rise to 9%, as they did in the wake of Ronald Reagan's tax cuts in the 1980's? That $580 billion becomes $1.8 trillion in interest payments alone.
The 2015 federal budget was $3.8 trillion, so interest payments of $1.8 trillion would be over half of the federal budget.
Of course, that is not something that the economy can bear, so the Federal Reserve will have to issue additional debt instruments to bridge the gap, which will force them to offer ever higher interest rates, creating a death spiral that will destroy the dollar and the U.S. economy.
What our democratically elected leaders fail to understand is that a nation must take on debt in times of crisis and war, and repay that debt in times of growth.
The Republican bet in this case is that we can grow out of our deficits, but with an additional $1 trillion in deficits already forecast for 2019 (and each subsequent year), the economy would have to grow by $11 trillion (based on a current GDP of about $20 trillion) to bring in the additional revenue to make up the shortfall and balance the budget.
Do we really think we can more than double U.S. economic output over the next four years? That implies an annual growth rate of over 20%.
Here is the historical GDP growth data in the post-WWII period:
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| https://tradingeconomics.com/united-states/gdp-growth |
In any event, when hyper-inflation hits it will make repayment of the debt MUCH, MUCH EASIER, as inflation will reduce it down to almost nothing.
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