Debt ... And Doubt

There are no political coincidences.  Let's start with that. 

Paul Krugman tells us that government austerity doesn't work.  You know PaulieK, right?  He's an economist, Obama adviser and Nobel Prize winner.  He has major cred with the administration, mostly because he trumpets that debt don't mean nuthin' and what the country needs is (gasp!) more government spending and more debt.  He's a Keynesian or, possibly, a Neo-Keynesian, or maybe an Obamian or a Neo-Obamian, though the difference is hard to track.

PaulieK isn't the only economic voice, though.  The late Milton Friedman was another.  MiltieF opposed Keynesian government policies, favoring the free market and minimal government intervention.  PaulieK is the stalking horse for Obama economics, MiltieF was that for Ronald Reagan.  Polar opposites, if anything.

"I’ve argued that worries about the deficit are, in fact, greatly exaggerated"  That's PaulieK on Jan. 3.  He says high unemployment is the real problem, not deficit spending, so the government needs to borrow more and spend more to get us out of our fiscal mess.  (BTW, wasn't The Stim supposed to cure high unemployment?  Just sayin'.)

The "coincidence":  On Jan. 31st last, the Tribune Washington Bureau ran the LA Times story "U.S. debt woes are not so dire."  "... (D)ebt is not even the country's biggest challenge, most experts say (my emphasis), and certainly it's not the most urgent."

So PaulieK says something and then Tribune runs an "experts say" story.  Coincidence?  I think not.  A lot more like propaganda. 

Let me translate:  "Don't you worry your little heads, citizens.  People Who Know Stuff will take care of this money thing."

Only they won't.  They are making it worse.  They are ruining us.

Friedman = Free market, less government.  
Krugman = More government controls and deficit spending, necessarily      bigger government.

Compare the Reagan/Friedman eight years (1980-1988) to the Obama/ Krugman 4 years (2008-2012).  (Thanks, Wiki):

Some increase during the prosperous Reagan/Friedman years, soaring debt-to-GDP increases in the lethargic Obama/Krugman years.   Take a good look, factor in any other data you want, and decide for yourself whose approach works better, Friedman's or Krugman's.

"The only relevant test of the validity of a hypothesis is comparison of prediction with experience."
Milton Friedman.

You heard it here first:  We're not going to repay the national debt and states with massive debt aren't gonna pay theirs either, nor will many of their cities.  At least not with the value they borrowed.  Nope, ain't gonna happen.  Ask City of Stockton bondholders.  There simply isn't enough money or time.

There are going to be new rules, like Hillary's "re-set" with Russia.  We're going to see something like that, only with money.  It has already started.  

Remember the lenders - pensions and such - who thought they held secured debt from GM and Chrysler?  Well, quelle surprise, they didn't.  The Prez's minions made up new rules.  The unsecured unions (and some others) got paid and the secured lenders got re-set... from billions to zero.  Sorry 'bout that, pensioners and bond investors.  

Oh, there will be self-effacing explanations.  One will be "We just couldn't keep going on that way."  And no, we can't, but we know that already, we don't have to wait to find out.

And the gummint won't call it an actual bond default.  They can't.  Much like the prez's flip-flop political views, our debt repayment schedule will "evolve."  BTW, foreign nation creditors will be exempt or otherwise made nearly whole. It's just our wealth that needs to evolve. 

Let me recycle my 2009 quote from the French finance minister:

 "If the problem is an excess of debt, the cure is not adding more debt, whether that debt is public or private."

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"If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand."
Milton Friedman