The Baystate Objectivist

The Baystate Objectivist

Sunday, February 7, 2010

The Debt Bomb

The Fuse is Lit

Of all the challenges facing America today, nothing is more threatening to our future as our ballooning national debt, which threatens to lock our nation into a permanent recession. Hopefully a libertarian revolution will arise in time to escape disaster, but the hour already grows late. As Jon Markman reports in Money Morning:

The most important fundamental development of the week was not any of a slew of economic reports but the new federal budget proposal released by the White House. And it was a doozy: The Obama Administration proposed to spend $3.8 trillion, with $1.6 trillion on the equivalent of the national credit card.

Investors did not overtly seem to mind today, but they will. It is almost mind-numbing to think we've gone from the surplus that President Clinton left President Bush to the trillion-dollar hole we're in now. There is nothing good about the scenario of bone-crushing debt, as we have seen repeatedly throughout the world recently in places like Dubai, Greece, the United Kingdom and Japan. The fact that the U.S. dollar has managed to hold its own despite representing a country deeply in hock is only testament to the weakness of every other major developed-world government.

It's ironic in fact that plenty of emerging-market countries are managing their books far better than the United States and Europe. They include Chile, Azerbaijan, Angola, Ukraine and Romania -- all with debt at less than 15% of national GDP, while we are knocking on 60%....

Slow growth of this nature ensures deficits of $1 trillion through 2011. In an appearance before Congress last week, Elmendorf called the debt bomb a dangerous level that puts the country's future into peril. "It is true that as we push [public debt] to 60% of GDP at the end of this year and beyond that over the next few years, we're moving into [debt] territory that most developed countries stay out of,'' he said.

This is serious stuff, and it is why voters appear to feel in their gut that the government has veered off in the wrong direction by tackling health-care reform and vilifying bankers when it should be focused 100% every day on seeking ways to encourage companies to expand and create new jobs.

Here is former Northampton Mayor (and the only Pioneer Valley resident ever elected to the presidency) Calvin Coolidge lecturing the nation on fiscal responsibility in 1924.

We could use a man like Calvin Coolidge today.

Birds of a Feather

Have you noticed at the supermarket check-out what the tabloids are doing to John Edwards? By the time they are through with him he will be the most hated man in America.

And whose judgement was so poor that they thought that the despicable Edwards should be a heartbeat away from the presidency? Why it was Massachusetts' own John Kerry, who picked Edwards as his vice-presidential running mate in 2004.

Maybe its time for Massachusetts to have a second new Senator!

At Raos

Today I went to Raos Coffeeshop in downtown Amherst.

Unlike most times I've been there, it wasn't too crowded.

I see that Raos has a new line of t-shirts, with a big eye on the back.

Raos coffee is indeed a real eye-opener which they brew very high in cafeine - and we love them for it! While I was there I ran into my friend Will who showed me a math problem he invented that was published in the November issue of The College Mathematics Journal.

Not only could I not solve the math problem, I couldn't even understand it!


Ronald said...

John Kerry should have been thrown out of office long ago!

Tim said...

I'll tell you Tom, maybe its because due to my job, I have years of experience dealing with thieves, and generally nasty people who lie and steal for a living. But, honestly the FIRST TIME I laid eyes on that Edwards guy, all kinds of alarms were going off. Just look at him. That guy is slicker than an eel. And as far as Kerry goes; he reminds me of a game David Letterman sometimes plays on his show, called "Is this anything?" If John Kerry was the subject in question, I think the answer is obvious. NO!

'bach said...

thanks tommy, i missed this one....

"my ship still stands no matter what you drop, there ain't a whole lot that you can do..."

Tony said...

The debt bomb is even uglier than that. The chart doesn't show the total, 'gross debt', which would include entitlements and social security, bringing the total debt to over 12 trillion. And even that number wouldn't include state and local government debt. At some point the collector will be at the door...