tag:blogger.com,1999:blog-132520298120231193.post407857235894157606..comments2023-12-23T02:10:09.875-05:00Comments on howl at pluto: Brooks, Burke, and Hamilton; or, tell me what will happen when the national debt hits 90 percent of GDPLFChttp://www.blogger.com/profile/13551197682770555147noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-132520298120231193.post-31110998849529872722011-01-28T23:45:21.155-05:002011-01-28T23:45:21.155-05:00Hank,
Obviously I'm not an economist, but I am...Hank,<br />Obviously I'm not an economist, but I am familiar with the standard definition of economics. I suppose financing a huge deficit could trigger eventual inflation (from printing money to pay the interest). If by "national collapse" Brooks meant a Weimar-style hyperinflation, he probably should have mentioned that in the column. (I'm also aware that some economists have made arguments about the connections between budget deficits and trade deficits, but at the moment I forget the details. There is also the argument about govt borrowing "crowding out" private borrowing, but Brooks did not mention that explicitly either.) As to the connection between how much 'real wealth' an economy produces and its ability to run big deficits, that seems a bit less clear to me right now but that could be because it's late in the evening and I'm tired and it will all be clear in the morning. <br /><br />I did not know Shields could play the piano.LFChttps://www.blogger.com/profile/13551197682770555147noreply@blogger.comtag:blogger.com,1999:blog-132520298120231193.post-40244735407918918302011-01-28T21:25:40.283-05:002011-01-28T21:25:40.283-05:00LFC
Whether it is 90% or not is irrelevant and pr...LFC<br /><br />Whether it is 90% or not is irrelevant and probably varies on a number of circumstances, but there is limit.. <br /><br />Remember the definition of economics is something like “allocating limited resources against unlimited demands.” <br /><br />Every economic transaction has two parties. If you borrow you need a lender. Too many of the comments from all sides seem treat the lender as a passive or semi-passive player in reality that is anything but the case.) The lender expects to get her principal back (in real terms not just the nominal value printed on the bill) with some sort to premium (again in real terms) for loaning something that he could have used for many other purposes. Paying principal and interest come before other expenses or you won’t find anyone else who will make a loan. More and more of what should go to sustaining the economy goes to servicing the debt until servicing the debt .prevents basic services.<br /><br />I don’t see how the current deficit is sustainable. It can probably be sustained longer that the prophets of doom are predicting, and pushed off by “printing” money, with the impendent inflation, echoing the Weimar Republic, until the nominal value printed on the money owed is valueless. Ushering in the equivalent of the Weimar Republic’s successor does not strike me as a good idea. <br /><br />We, and the Western world, have avoided the conclusion a lot longer than societies in the past because of increased productivity producing real value. There is an irony that an economy that could produce enough wealth (in real terms) to sustain the current deficit levels and to support the Presidents plans would in the long run require the productivity of an ecologically and socially irresponsible hyper-capitalism that almost no one would support and the President would detest and fight to the end.<br /><br />Or to put it another way we are promising to allocate to demands more resources than we have.<br /><br /><br />PS<br /><br />Shields has the advantage of Brooks, he can sing and play the piano.hank_F_Mhttps://www.blogger.com/profile/09851295792702162861noreply@blogger.com