James Pethokoukis

How BaucusCare is like eating pie

September 16, 2009

From Greg Mankiw:

In other words, the plan would reduce the deficit if it were carried out as written, but there is good reason based on historical experience to be skeptical that it would be.

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 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: