Thursday, June 14, 2012

There is no correlation between the level of Federal debt and interest rates...NONE!!!!

The Debt Doomsday crowd is wrong...AGAIN!!!

Sheesh...when will these guys get it???


Neil Wilson said...

Brilliant Mike. The camera loves you.

PeterP said...

They will never get it because there *is* correlation for countries using foreign currency (Euro), pegs etc. Before people start differentiating there is no convincing them: how about Greece, also no correlation?

Mike Norman said...

Thanks, Neil!!

Matt Franko said...

Cool background Mike!

paul said...

Vey enjoyable and informative.

Keep up the good work.

Anonymous said...

Hi Mike, greatly appreaciate the work you're putting in.




Act as you want, say what you want, treat the camera as yo bitch.

Then, if needed, edit it later.

Don't act for the camera, make the camera act fo' yo, muthafucka.

Ralph Musgrave said...

Hi folks. It’s Mr Doom ‘n Gloom here.

The apparently high interest rates around 1980 are explained almost entirely by inflation. In the post entitled “Even money printing is not inflationary” below, the chart shows nominal rates peaking at 15% around 1980. Well inflation peaked at 13.5% in 1980 according to this site:

That doesn’t invalidate Mike’s point, as the yield on U.S. government debt is now about equal to inflation, far as I can see. But it takes some of the force out of Mike’s argument.

Also I think the doomsday lot are correct to say that ALL ELSE EQUAL the more cash and/or debt the government wants the private sector to hold, the more interest government will have to pay those “holders”. But the problem is that “all else” is nowhere near “equal”. That is, I’d guess there is an increased desire to hoard safe assets right now, as many people got their fingers burned in the crunch. But that lack of appetite for risk might easily vanish in a year or two.

Warren Mosler promotes the idea that there is a relationship between the amount of government debt and interest rates, ALL ELSE EQUAL, in his “parents, children, and business card” analogy. That’s in his Soft Currency Economics article. I agree with him.

Matt Franko said...

"But that lack of appetite for risk might easily vanish in a year or two."

Good point Ralph. This thing could turn around.

I believe it would not take much of a bottom up tax cut (few $100B) to start the ball rolling, this we will NEVER get from an Obama Administration that has been captured by the Peterson anti-deficit forces.


lowerleftlimit said...

As usual great job Mike keep it up!

Shaun H.

Anonymous said...

EXCELLENT VID, MIKE!! the graphics are a bit on the cheesy side, but, hey, it's easy to see where you're going with this, so it's not such a big deal.

anyhow, you've gotten really good at this, so keep it up, mike!! and win the fight--just win it, baby!!