Ok, who turned the lights on, and who let this past the editorial board?
For openers, suppose the federal government actually does reduce its expenditures by 40% overnight. That translates to roughly $1.5 trillion at annual rates, or about 10% of GDP. That’s an enormous fiscal contraction for any economy to withstand, never mind one in a sluggish recovery with 9% unemployment. Even contemplating such a possibility is evidence of a dark, self-destructive impulse.
It’s actually $1,700 billion and 12% of GDP, but that’s close enough.
Alan, of course, was talking about how it’s “irresponsible” to talk default.
But what he just said was exactly what I’ve been saying now since 2008, and which, when I’ve said it, has gotten me labeled a “loon.” It’s also why all this arm-waving on the budget is going to go exactly nowhere, and ultimately our nation will hit the wall and self-destruct, as we are incapable of facing the above fact as adults and dealing with it.
For three years we have done this in a futile attempt to get the private economy to take the baton back. But it can’t, because the capacity and willingness for consumers to borrow more and thus generate more false growth is exhausted. The only place consumer credit is increasing is on students, an evil and outrageous act of exploiting those who are too young and foolish to understand what’s being done to them, and an act for which those purveying that “cheap money” deserve to burn in eternal Hell.
Thank you for finally printing what I’ve been saying now for the last three years in the mainstream press, coming out of a former Fed President’s mouth!
Got it yet folks?
The only reason we have not recognized an economic Depression is because of utterly unsustainable government borrowing and spending of money it does not have and which it has no hope or intent to ever take in via taxes in the future.
In other words, the Government has been lying to you.
There has been no economic recovery and we are in an economic Depression right now and have been since 2008.
There was no economic recovery after the 2001 Nasdaq collapse. The government borrowed and spent about 5% of GDP at the time every year to fake a recovery and we ran a debt-based false “recovery” when in fact we were in a five year long recession marked by an orgy of false “wealth” through bubbling home prices.
Now we’re borrowing and spending 12% – more than double that amount – a year to fake a recovery that has shown up in stock prices, and it mathematically must end the same way.
Alan let the cat out of the bag.
A cat that I’ve been telling you for three years has been scampering all around the floor.