Gary Cohn: Congress Needs To Be Ready To Spend $3-5 Trillion ‘At Any Given Moment’ In Crises
One person who has clearly come around the reality that there is no putting the genie back in the bottle when it comes to government spending to cushion the blow from acute crises, is Gary Cohn.
Cohn showed up on CNN Sunday for a chat with Fareed Zakaria, and he was not shy about discussing the deficit and the necessity of rethinking how Congress approaches the debate around borrowing, spending and taxation.
"There are people who are worried now, as you know, on Capitol Hill, about the debt",
“Congress has to think differently” going forward, and they have to acknowledge that we are going to have another crisis.”
Why do all other commentators ignore the reality of another eventual crisis in their prognostication? Most people talk as though COVID-19 and its carnage on lives and livelihoods is all we have to worry about, as they debate the shape of a recovery. There are multiple worries to consider:
As H points out repeatedly, the trade war is heating up. Hong Kong’s demise and capital controls lurk. A domestic terrorist attack is not impossible. An asteroid plopped on Silicon Valley would take care of FAANGM’s. And Tom Cruise might have a tantrum once he reaches the ISS.
I think they need to look at our tax system and they have to think of ways we raise revenue…,this from the individual who orchestrated Trump’s tax cut, what chutzpah!
No sh*t.
“Why issue the debt in the first place?” Just print the money and hand it out… then everybody is happy? Except for maybe those that are holding our previously issued debt as they watch their investment being diluted? Not sure I have this right, H. Instruct me?
Hi MC, I’ll take a stab at this.
If there is no resulting inflation (for goods and services), and the US Dollar holds its value, then the existing holders of previously issued debt are not negatively impacted.
They only get hurt if goods and services inflation gets out of control, devaluing the US Dollar. Because then they’re getting paid back in a currency that isn’t worth what it was when the initial loan/investment was made.
thanks to you Prestwick AK… I guess I am not so worried about the inflation aspect as H has mentioned the Fed has been monetizing debt for so long, I am worried that we lose the confidence of our bond holders as to our long term solvency
I read and read and read. I think and think and think. Things happen and happen and happen. I personally perceive no correlation between these factors. That leads me to the following theory of human life:
The World was created when a colossal amount of shit encountered a gigantic fan.
That explains everything.
Survival requires skillful artful dodging and even then things do not always go well.
100 percent.
The big dump theory.
I like your theory of world creation way better than God taking 6 days to craft his “master piece…”
What is the primary dealers “take” in this arrangement? While they are there for nominal appearances’ sake only, my guess is this “illusion” we have created probably costs us many millions. So we are paying to fool ourselves, but not really. If nothing else, that is certainly MAGA.
This set of issues seems to have no proponents to the fact that all this is unprecedented… Actually this is the game called ‘the cat that ate the Canary ‘ None is going to get the canary back and that goes double for the money that was extorted by a few pretty smart operators while America was texting on their Facebook page… Could be Ray Dalio has a better handle on this than he is credited with ….(lately)
I’d like to hear our moderator talk more about the implications for societal inequality. There’s been no “real-world” inflation because this money stays with the financial firms, which drives asset inflation, and nearly all financial assets are held by the top 10% of the wealthy. So our economy gets hollowed out with less productive capacity because of the lack of valid economic signaling, while the wealthy party on. Sure, the state pensions also need the stock market to go up, but I’d still like to hear more about implications for inequality and long-term dysfunction in the economy when zombie corporations are allowed to survive.
Oh my God, so the “Laffer’s Curve” didnt ever work? I’m really shocked!
US can print, borrow, behave poorly, pretty much do whatever it wants until China can form an alliance with a credible nation/currency.
Then watch out.
A book of interest, “Disunited Nations,” one man’s opinion of course, but worth a read. A dissertation on the end of the Order which is basically the system put in place by the US to counter the Soviet Union after WW2. Basically, if you are a “friend,” we have your back and will guarantee the free movement of goods protected by the most powerful navy on earth. In his analysis China is toast. I have a difficult time envisioning the US taking this route but food for thought nonetheless.
“Of course, some of this thorny debate could be relegated to the dustbin of history (where it probably belongs) if people would free themselves from the imaginary constraints of deficits and make-believe “limits” on spending the dollars America itself issues.”
H many would argue that your view of history is too short-sighted. Ten years of stimulus without inflation means little when to go back a few more decades. Or centuries. We’ve had a dozen 500 year floods in the last 15 years in various parts of the country, we can’t have a 200 year financial event? I would highly encourage you to listen to Danielle DiMartino Booth’s (Author of Fed Up) podcast from yesterday for some great insight on this. Hyperinflation and/or loss of Dollar sovereignty are not only possible, they are becoming more and more probable. Yes, it’s more probably that neither one happens, but your adamant dismissiveness when it comes to either one is alarming, considering that you present a balanced view on nearly everything else. Do us readers a favor and at least publish an imaginary scenario in which one or both happen.
Money can be replaced lives can’t come on people help the American people that’s a good way to get the economy going