“What’s In Your GDP?”

Joe Doakes from Como Park emails:

Turns out my way of thinking is old-fashioned. I need to think like a millennial. I understand it all now.

The national debt is $20 trillion but interest on the national debt is only $200 billion, which is only 5% of the annual budget.

We don’t care about the total amount of debt. We don’t even care about the annual deficit, because . . .

WE CAN AFFORD THE MONTHLY PAYMENTS.

That’s literally The Plan for running the nation. Just keep running up debt to buy what we want, and make the minimum monthly payment.

But why stop there? Why make the payment at all? Why have student loans – just make college free. Why have FHA loans – just make houses free. Government pays for everything, add it to the debt, make the minimum monthly payments.

Why go half-way? Go all the way!

Joe Doakes

It’s the “Everyone’s pal from college who just kept on running up new credit cards” theory of budgeting.

Someday – five years?  Five generations? – some government will treat “reversion to a barter economy” as “everything is free!”.

9 thoughts on ““What’s In Your GDP?”

  1. There are two must watch videos on Real Vision that are THE best explanation of why using anything but “commodity money, “ gold mostly, is an EXTREAMLY bad idea.

    This is how you end up with Joe correctly pondering all of this in a letter.

    All paper money ever ***ends up*** doing is facilitate waste, graft, misallocated capital, bad behavior and unfunded government liabilities. ***2%*** GDP forever followed by a bond market collapse and Mad Max.

    King Banaian suggested fiat locked in to a 10 commodity price standard. Jim Grant says gold + fractional reserve lending is plenty flexible and realistic. There are different ways to do it.

  2. LBJ got Arthur Burns to give him guns and butter and then Nixon closed the gold window. We’ve had a fake, excessively debt based economy ever since. Speculation, graft, dependency, etc. Voting just makes it worse.

  3. These fake low interest rates misallocate capital —> low GDP —> government runs out of money, but 4% on the 10 year treasury breaks the government. So let’s build a Choo Choo train.

  4. JD, you have just described the libturd thinking – everything from the goobernment, everything for the goobernment. ie, slave to the goobernment. Libturds abhor freedom, they earn for the boot up the arse.

  5. Gross Domestic Product is the sum of all government and private expenditures. I have often argued for a Net Domestic Product which is calculated by subtracting government spending from private spending.

  6. What do you do if you are a nation running an annual budget surplus with no debt?
    You could borrow the surplus to other nations, but if your currency is the reserve, doesn’t that amount to trading dollars for blatniks (or whatever)?
    I suppose you could cut taxes 🙂

  7. When did our federal debt ever hurt us? FDR increased the debt 1000% to finance fiscal policy. Reagan tripled the debt and ran record deficits. Obama added more than $9 Trillion to the debt and had the highest deficit-to-GDP ratios since WWII. Did such profligacy result in increasing inflation? Hardly. Inflation today is at a 50 year low: 1.3% for 2016. The Fed has not hit its 2% target on an annual basis since 2012 when it was 2.07%. https://fred.stlouisfed.org/graph/?g=gJ4#0

    On the other hand, the worst sustained inflation we have had during the last century – the decade 1973-1982 — occurred when deficits were low — averaging 2.4% of GDP and the federal debt never exceeded 35% of GDP.

  8. Emery, it strikes me that the debt hurts us every year, and that pain is well described by the amount of money it takes to pay the interest. No? The question is not whether it hurts us, but rather whether what we bought with that debt is worth it to us.

  9. I agree and of course payments on the interest should matter. Generally speaking, the usual method is for an administration to go deep into debt for the 1st two years, reduce it for the last 2nd two years, and ask for 4 more years to continue until the budget debt gets under 3% of GDP.

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