From: an030@cleveland.Freenet.Edu (Broward Horne)
Newsgroups: talk.politics.theory,talk.politics.misc
Subject: Re: Death of America 5
Date: 26 Dec 1992 21:38:50 GMT
Organization: Case Western Reserve University, Cleveland, OH (USA)
Reply-To: an030@cleveland.Freenet.Edu (Broward Horne)
NNTP-Posting-Host: hela.ins.cwru.edu


In a previous article, kwee@oracle.uucp (Karl Wee) says:

>>   For one thing, you can always inflate your way out of the debt.
>>   You don't need hyperinflation to do it.   There are *plenty* of
>>   historical examples of countries which endured 5-10 years of 
>>   6-10% inflation and in doing so got their national debts under
>>   control.  Many European countries have done this -- often you
>>   end up with stagnant economies like the UK's but that's not
>>   the same as mile-long bread lines and Hoovervilles at the 
>>   edge of every city.
>
>In this country, in order to "inflate away the debt", the Federal Reserve has
>to agree to buy US bonds with "empty money", a process equivalent to printing
>money.  The chairman of the Fed operates independently.  Will he be willing
>to make this vastly unpopular (inflationary) decision which is historically
>directly counter to the Fed's traditions and policies in order to bail out
>the politicians who have year after year ignored his advice about the
>deficit and gotten us into this mess?  Or will the economy die of panic
>in the financial markets and bank failures before he makes such a
>decision?


     Re: Inflating away the debt -

    The INSTANT our government attempts to "inflate" away the debt now,
    an economic atomic bomb will explode, in the form of $1 to $4 TRILLION
    in dollars and bonds rushing into the U.S. economy.


    It ain't gonna happen.  Either scenario ends in disaster.         
>
>I argued a long time ago with Peter Nelson about this point.  I have


      Why bother?  He's one of those who can't adapt to the emerging 
      paradigm.  Let him be swept away.  :)    Hehehehe.


      I find it hard to believe that ANYONE believes the status quo can
      continue for much longer.  Lots of pensions are going away.  I suspect
      that this is way Mr. Apollo argues so strenuously.  :)   I worked a 
      HP too.  They're not all they're cracked up to be.  I sure ain't 
      counting on a pension from corporate america.


      I'd really like to know how inflation is being calculated now.  Looking
      at our christmas season:      


            Say that the average discount last year was 20%
            Looking at the numbers, this year's discount was pretty low,
            say 5%.


      Now, how is this difference in actual cost being taken into account?
      My guess is that it ISN'T, and in fact, we're seeing some big inflation
      that isn't being measured, or reported, for now.


>to stress again that, ultimately speaking, the debt crisis is a tremendous
>RISK (with a bottomless downside) that would be stupid for any society to
>get into, much less wander into in a dreamy state like we're doing now.
>Sociology and economics are not sciences with reproducible results.  Just
>because some European countries have survived this problem doesn't mean we
>can do the same because so many things are different.
>
>Conclusion: There is a vast vested interest in keeping the public from
>discussing the deficit seriously.  They are mainly: 1. the government, since
>politicians don't want to make their jobs tougher and want to maximize their
>chances of passing the time bomb to their successors.  2. the investment
>banking community, who currently have large holdings for themselves and
>their valued clients in government bonds.  They don't want the uncertainty of
>market upheavals and want to keep things steady so they can keep making
>money for as long as possible.  I'm willing to bet that most of them
>are quitely getting out of anything that loses value when
>interest rates rise or inflation hits.  As evidence, consider the
>stubbornly high yield of long-term US bonds during the past year
>when interest rates were falling again and again.
>
>These people actually WANT to delay the crisis to suit their private
>purposes.  However, the more it is delayed, the worse it will be for the
>country.  It's less a conspiracy of silence than a conspiracy to keep the
>volume down.  These people are not fools, but we'll be taken for fools
>unless we turn up the volume now.
>
>- Karl Wee
>

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