[ExI] perspective on covid
spike at rainier66.com
spike at rainier66.com
Mon Mar 9 15:34:29 UTC 2020
> On Behalf Of John Clark via extropy-chat
Subject: Re: [ExI] perspective on covid
On Mon, Mar 9, 2020 at 9:53 AM spike jones via extropy-chat <extropy-chat at lists.extropy.org <mailto:extropy-chat at lists.extropy.org> > wrot
>>… We are borrowing like mad just to cover normal expenses. Interest rates are at unprecedented low levels. US government debt is setting new records every day as a fraction of GDP. The US is living on borrowed money.
>…All that is true, but if you're theory is correct then one of those 4 sentences does not belong with the other 3, namely "Interest rates are at unprecedented low levels". I must therefore conclude that your theory about deficit spending is not correct. You didn't mention it but we also have a very low inflation rate, and that fact is also not compatible with your theory…
On the contrary. Low interest rates seduce the US government into borrowing more and more money. In addition, plenty of homeowners have borrowed money against their homes at low interest rates, hoping to invest in the stock market with their equity. This sets up a ticking time-bomb. As interest rise (no one believes they will stay at 1% forever) the debtors will be unable to service their own debts. The US government will be unable to raise enough revenue to continue borrowing, upon which it has grown dependent. Government services will be cut drastically, rather than gradually as we are now seeing.
The option remains to raise taxes, but that is politically unpopular and depresses the economy. So we really bank on that.
If one borrows heavily during low interest times and invests in some high-value asset, to sell later and pay back with cheaper dollars, I can see that philosophy (it worked so well for so many real estate investors.) But if one borrows heavily and does not have high-value assets afterwards, such as the US government, all it manages to do is lose its ability to live on its own revenue.
>> There are so many restrictions now on what POTUS can do,
>…But not NEARLY enough!
Don’t worry John. This trend toward reduction in US government power is irreversible.
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