LOL!
After Doubling US Debt In 8 Years, Yellen & Furman Fearmonger "A Debt Crisis Is Coming" https://t.co/GlMG1wLJNN
— zerohedge (@zerohedge) April 9, 2018
After Doubling US Debt In 8 Years, Yellen & Furman Fearmonger "A Debt Crisis Is Coming" https://t.co/GlMG1wLJNN
— zerohedge (@zerohedge) April 9, 2018
7 comments:
Yellen has a point, thought "crisis" is too dramatic. The best size for the deficit depends on what rate of interest we want. Personally I like the Warren Mosler / Milton Friedman "permanent zero rate" idea.
If that's the objective, or at least if the objective is to keep interest rates well down, then when Treasuries mature and Treasury holders want them rolled over, the Fed needs to print money and pay off the holders, and when the holders want their Treasuries rolled over, the Fed needs to stick two fingers up at those would-be debt holders and tell them to go away. Or to put it more politely, the Fed needs to continue with some QE.
That could easily be too inflationary, so some sort of deflationary measure like raising taxes and "unprinting" the money collected would be needed. That would cut the deficit.
Ralph, over here the state govts are going bankrupt due to lack of interest income in the pension accounts.... we need higher risk free rates...
Why doesn't the federal government just fund the state pensions directly rather than through interest payments? Duh.
Matt, I don't think there's an obligation on taxpayers to fork out just because someone somewhere wants to hoard large wads of $100 bills, which is what government debt amounts to, and earn interest on that hoard. If states staked everything on interest rates not falling, that's their problem.
Well that’s the way it works Ralph...
Matt,
Can you link me to some information / analysis on the connection between state budget deficits, pensions, and interest rates?
https://www.gurtin.com/blog/calpers-lower-expected-rate-of-return-tempered/
“The board’s decision to go with the phased-in, less aggressive approach rather than an immediate move closer to the 6.21% current expected return reflects the challenge that pension plans face: trying to balance expectations in a low interest rate environment with the impact of higher annual pension contributions on state and local government budgets. A lower assumed rate of return for the system’s assets sets off a domino effect, first leading to a lower”
Leads to cuts in state and local govt spending to pay greens fees for retirees at The Villages in Florida.... grass in Road shoulders 3’ tall and never mowed.... shitty roads... social services gutted.. summer programs cancelled.... etc...
Need rates back to 5% or some sort of nationalization program like Tom mentions (which is NEVER going to happen...)
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