Unfortunately, the title of this post is not just the name of a Funkadelic song (and album) from 1972. It is also the best way to describe what is happening to the Millennial generation as we speak. And it's not good.
An excellent article by Stephen Marche (in Esquire of all places) really hits the nail on the head in describing what is happening. Which is nothing short of intergenerational robbery.
To the aging Baby Boomers who are currently voting and/or in power, listen up: You have only a few short years left to rectify these wrongs before they become irreversible. And you have the power to do so. You may not like what has to be done, but it is FAR better than the alternative. Even the most self-centered and self-interested among you should be able to see the writing on the wall. Remember that the Millennials are the ones that will be paying for your retirement and ultimately deciding your fate as far as that goes. And unless you want to end up in the gutter because we are too broke to pay for it all, you might just want to invest in us instead of hoarding or squandering your vast and unprecendented wealth.
Wednesday, May 23, 2012
Monday, May 7, 2012
The Only Way to Defeat the Debt
Our national debt is approaching $16 TRILLION dollars, and our deficit
remains well over a trillion, meaning that the debt is still growing rapidly.
It is now mathematically impossible to pay off the national debt by
conventional (fiscal) means--even the Donald Trump Tax would raise "only" about a
trillion or so based on our back-of-the-envelope calculations. So what should
we do?
Obviously, if we find ourselves in a hole (especially one as deep as this), the first thing we should do is stop digging. That means no more deficit spending for the foreseeable future, period. But unfortunately, that's a lot easier said than done. Taxes will have to go up and spending will have to go down--dramatically. There is really no way around that.
However there is a relatively painless (albeit unconventional) method of paying off the debt. Not just this year's deficit, but all of the cumulative $16 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated in the past: printing (electronically creating) money out of thin air to pay it off all at once. Alas, the genie is out of the bottle now, as the Feral Reserve has been creating money out of thin air for decades (including a recent whopping $16 trillion secret bailout of the banks) so we might as well put this practice to productive use. Call it QE4 if you'd like. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the Feral Reserve to avoid creating more debt in the process. Or better yet, abolish the Feral Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress. America would then be free and clear for the first time in history since Thomas Jefferson.
Of course, while doing it once may not be harmful, doing it regularly can be. To make sure we never have to do this again, we must make sure the debt never, ever, reaches such stratospheric levels again, period. In addition to abolishing the Fed, fiscal policy must be tightened after the Noble Solution is implemented and the debt is paid off. We have already outlined in previous posts what must be done as far as taxes and spending are concerned. We will need to have a Balanced Budget Amendment added to the Constitution as well, with deficit spending permitted only in severe fiscal emergencies. Fortunately, the latest news suggests that the deficit may already be shrinking as we speak as the economy improves (albeit very slowly). After all, a significant portion of the fiscal gap is due to reduced revenues resulting from the Second Great Depression (because that's what it really is) as well as the several fiscal stimulus measures made necessary by the crisis. (Nearly all of the rest can be chalked up to the wars and the Bush-Obama tax cuts, as well as various loopholes and tax-shelters.)
But the bottom line is that the debt must be defeated, and soon. We simply cannot afford to continue kicking this can further down the road. Otherwise we may very well go the way of the Romans.
Obviously, if we find ourselves in a hole (especially one as deep as this), the first thing we should do is stop digging. That means no more deficit spending for the foreseeable future, period. But unfortunately, that's a lot easier said than done. Taxes will have to go up and spending will have to go down--dramatically. There is really no way around that.
However there is a relatively painless (albeit unconventional) method of paying off the debt. Not just this year's deficit, but all of the cumulative $16 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated in the past: printing (electronically creating) money out of thin air to pay it off all at once. Alas, the genie is out of the bottle now, as the Feral Reserve has been creating money out of thin air for decades (including a recent whopping $16 trillion secret bailout of the banks) so we might as well put this practice to productive use. Call it QE4 if you'd like. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the Feral Reserve to avoid creating more debt in the process. Or better yet, abolish the Feral Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress. America would then be free and clear for the first time in history since Thomas Jefferson.
Of course, while doing it once may not be harmful, doing it regularly can be. To make sure we never have to do this again, we must make sure the debt never, ever, reaches such stratospheric levels again, period. In addition to abolishing the Fed, fiscal policy must be tightened after the Noble Solution is implemented and the debt is paid off. We have already outlined in previous posts what must be done as far as taxes and spending are concerned. We will need to have a Balanced Budget Amendment added to the Constitution as well, with deficit spending permitted only in severe fiscal emergencies. Fortunately, the latest news suggests that the deficit may already be shrinking as we speak as the economy improves (albeit very slowly). After all, a significant portion of the fiscal gap is due to reduced revenues resulting from the Second Great Depression (because that's what it really is) as well as the several fiscal stimulus measures made necessary by the crisis. (Nearly all of the rest can be chalked up to the wars and the Bush-Obama tax cuts, as well as various loopholes and tax-shelters.)
But the bottom line is that the debt must be defeated, and soon. We simply cannot afford to continue kicking this can further down the road. Otherwise we may very well go the way of the Romans.
Subscribe to:
Posts (Atom)
