Posted on 07/27/2010 6:33:22 PM PDT by Behind Liberal Lines
Debt itself is deflationary. Once debt accumulation reaches a certain level, additional spending and money printing can’t overcome the combined deflationary effects of the cumulative debt.
That is why Japan has been stuck in deflation after borrowing and spending 4 times more than the U.S. since 1989.
For 21 years Japan has had deflation, even after vastly expanding their money supply.
Does anyone here think that Japan’s next Stimulus spending will pull them out of deflation in 2011?
22 years is all that they need?! Does anyone really think that one more round of new debt+spending will flip Japan from deflation to inflation?
People used to defend Japan’s debt+spending yielding deflation as due to Japan’s savings rate.
For 2009 and 2010, however, Japan’s savings rate is only 2%. Here in the U.S., our savings rate is now 4%.
That’s right, the U.S. is now saving more than Japan.
So Japan is running up 4 times our debt and saving half as much as us annually.
There’s a whole crop of people who would **swear** that Japan should have inflation from all of that new money-printing.
Uh, uh.
Japan has the opposite: Deflation.
And Democrats wanted everyone to believe Bush’s economic policies were horrible?
You’ve nailed it.
If you’d like to show people a nifty graph of what you say, flip up the chart of the M1 monetary multiplier from the Fed’s FRED database. I’m on a smart phone, so I can’t easily browse FRED for the url to the graph, but I know it is there and shows what you’re talking about.
Actually, that’s not a solution. It’s not enough. Merely ending the employment of every government bureaucrat and military enlistee and office cannot repair the deficit hole. We must:
* make more babies (married couples only) and let babies live long enough to exit the birth canal alive (whether with married parents or otherwise) that with the following reforms, they might produce goods and services sufficient to afford the taxes necessary to pay back the debt
* eliminate the innovation-stifling regulatory burden of government
* drastically curtail entitlements, which now comprise a HUGE proportion of government spending and escalate annually; Medicare and Social Security already each consume more tax dollars than the entire military
Japan has huge problems because the Japanese people quit reproducing. American children aged 0-5 (citizen, immigrant, and illegal alien) today only barely outnumber the corresponding cohort in 1962. Those “baby boomers” are heading for retirement, and we, the few children whom they produced but didn’t exterminate, must bear the burden and pay their bills; it’s the law of Congress.
Declining populations are inflationary. Kill a large ethnic group, take all of their money and redistribute it to yourself or to their heirs, and you’ve got more money held by a smaller population. More money per person is inflationary.
But inflation isn’t the problem.
Deflation is the problem. That’s the opposite.
Japan has Deflation. Why?
Japan has expanded their money supply four times as fast and as large as the U.S.
Doesn’t expanding the money supply cause inflation?!
What else is going on?
Of course, the *answer* is debt. Debt accumulation is Deflationary.
Debt Accumulation is also cumulative. Think about that fact. That’s a very different effect than Stimulus Spending. Stimulus spending is *not* cumulative. Nope.
Stimulus spending is temporary.
Ohhhhhhhh...
In other words, there comes a point in time where temporary Stimulus Spending can’t overcome aggregate debt accumulation over the Ages.
Once you reach that point, borrowing and spending no longer offers the option of inflation.
The only thing that an economy can get...for decades at a time ala Japan 1989 to today... is Deflation.
http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf
“Federal Debt and the Risk of a Fiscal Crisis”
A series of issue summaries from
the Congressional Budget Office
JULY 27, 2010
I believe he will announce another trillion dollar stimulus
Package and the Brain dead Morons in the audience will give him a standing ovation,which will be broadcast on every news and cable network nationwide causing Obumbos ratings to go up
It seems the link in post no. 27 is not working right now.
Here’s another link:
http://cboblog.cbo.gov/wp-content/uploads/2010/07/07-27_Debt_FiscalCrisis_Brief.pdf
Nope! According to their plan we are all going to sit around on our butts and draw money directly from the government printing office. Eternal prosperity. See, no one has tried that before. They are the ones we have been waiting for!
I think a distinction can be made to what kind of debt. Governmental debt would be deflationary as less money to spend overall and stimulate the economy. However private debt would have the opposite effect in so much as people take on heavier obligations purchasing items thus an inflationary effect.
My question would be if we know the fed. reserve will continue easing monetarily and print a whole bunch of money which they will (only a matter of time), what avenues do they have to get that money to us directly in the form of private debt as opposed to governmental debt. This would allow the money to circulate in the economy. Their purchases of mortgage backed securities was one way so that the money could get out to us and percolate in the system. What’s next?
Ladies and Gentlemen: The CORRECT answer is for a 2nd Constitutional Convention to be held...we only need 1 or 2 more states to agree...and for that august body to then DISSOLVE the United States of America! With that dead carcass out of the way, the delegates could then form a NEW government, one that is of, by, and for the PEOPLE!
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