James Pethokoukis

Taleb: Suck it up, America!

September 16, 2009

Nassim Nicholas Taleb (via The Globe and Mail) on why the banks should not have been bailed out and why China should not buy our bonds:

The government bubble

September 14, 2009

Ed Yardeni gets it right, again:

Central banks, including the Fed, caused the housing bubble. Now they are once again conspiring to inflate the next bubble, i.e., the US Government Bubble. Over the past 12 months through August, they purchased $868.9bn of US Treasuries. Over this same period, the federal deficit totaled $1332.6bn and publicly-held federal debt soared $2005.0bn. This helps to explain the most recent conundrum in the bond market, i.e., why yields remain so low despite huge current and projected federal budget deficits.

Inflate away the debt? Yes, that is a stupid idea …

September 11, 2009

As Bruce Bartlett correct observes:

Although it is thought that inflation is an effective way of
reducing the burden of debt, this is no longer true. For one thing, a
declining portion of the debt is financed with long-term securities.
Today, just 3% of the debt consists of bonds with maturities of 20
years or more; 10 years ago, the proportion was four times greater. To
the extent that the debt consists of short-term securities that must
constantly be rolled over, inflation does nothing to erode its value
because interest rates just rise to compensate, raising interest
payments and borrowing, thus maintaining the real value of the debt.

The worrisome fiscal situation of states

September 4, 2009

A fun factoid from Gov. Mitch Daniels of Indiana shows just how much trouble states are in (via WSJ):

The consequences of massive budget deficits

September 3, 2009

The Cleveland Fed gives the bad news:

First, without a correction on the spending side, more tax revenue will need to be raised, with the consequence of subjecting the economy to greater tax-associated inefficiencies.

Do we need a Fiscal Fed for fiscal policy?

August 31, 2009

Long after the American economy returns to growth mode, the national debt will continue to soar. According to the Congressional Budget Office, the national debt — as low as 33 percent of GDP in 2001 — will reach 54 percent of GDP this year and grow to at least 68 percent by 2019. Beyond that, the increasing cost of mandatory social insurance spending will certainly push the U.S. debt-to-GDP ratio ever higher in the decades ahead.

Krugman: U.S. budget is fine if nothing goes wrong. What?

August 28, 2009

What a weird column from Paul Krugman. He says Americans shouldn’t worry about the ten-year budget forecasts ($9tr debt,  70 percent of GDP) because a) plenty of other nations have had far higher ratios, b) other countries continue to lend to the US, and c) it’s the longer-term liabilities that are the problem.

The U.S. debt trap: the odds on seven solutions

August 28, 2009

How will America escape its debt trap? The indispensable Arnold Kling puts some odds on various scenarios. An excerpt:

America’s perilous fiscal future: slow growth, high taxes

August 26, 2009

Howard Gleckman over at TaxVox does a great job on the new government budget forecasts. This is my favorite bit (bold is mine):

10 reasons why the next budget debate will be a doozy

August 26, 2009

Maybe it should be a trillion reasons. But budget guru Stan Collender paints a picture of the future: