10Y David Stockman debt economy

David Stockman Bemoans ‘The Night Of Fiscal Infamy’

"We have crossed the fiscal Rubicon."

"We have crossed the fiscal Rubicon."
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4 comments on “David Stockman Bemoans ‘The Night Of Fiscal Infamy’

  1. I believe that David Stockman forgets to adjust for the fact that US Government spending is wildly inefficient. Sure, they approved an 82 Billion Dollar per year increase, but we probably get about 3 Billion worth of value out of that, and a 79 Billion Dollar dead weight loss.

    Give North Korea or China an 82 Billion Dollar increase and I bet they would really get something done with it. We may be “the best”, but when the best costs 10x more than good enough, you’re probably OK to accept pretty good and do something else with the money.

    Paying down debt is probably the best option for the government and US citizens. Though admittedly more borrowing means more inflation, and more inflation means you certainly don’t want to save your money!

    Maybe consider some gold. It will inflate, you don’t have re-payment risk like with bonds, and you won’t have any debt service to worry about like you would on a financed investment.

  2. Shifting income to the rich by taxing dividends, capital gains, inheritances and corporate profits much less than the tax rates on wages also tends to make more funds available for investment since when the investment is taxed relatively less, more funds are made available for the investment. That would also put downward pressure on interest rates.

    The primary change that has fundamentally changed the economy can be best described by Warren Buffett, CEO of Berkshire Hathaway (NYSE:BRK.A) (NYSE: BRK.B), who said, “Through the tax code, there has been class warfare waged, and my class has won,” to Business Wire CEO Cathy Baron Tamraz at a luncheon in honor of the company’s 50th anniversary. “It’s been a rout.”

    The forces driving inequality through the class warfare that Warren Buffett points to are cumulative. It is the compounding effect of shift away from taxes on capital income such as dividends, capital gains and inheritances each year as the rich get proverbially richer which is the prime generator of inequality…
    The shift of wealth from the middle class to the very wealthy has profound impacts on the economy and securities markets. It creates a cycle where initially the wealthy pour significant amounts into investments they perceive to be safe. This can first cause an increase in economic activity. In 2005 many considered mortgage-backed securities with adjustable interest rates to be essentially risk-free. This was especially true for those rated AAA by Moody’s and S&P. This resulted in overinvestment in the real estate sector. The middle class eventually could not service the mortgage debt on their homes nor could they buy enough goods at shopping centers and department stores to generate enough funds to prevent many residential and commercial mortgages from defaulting…”

  3. tootalltom

    If not gold…what is left?

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