Monday, October 19, 2009

Senator Judd Gregg needs a schooling on our monetary system

Senator Judd Gregg's (R-NH) comments on news programs over the weekend shows he is completely out of touch with macroeconomic reality.

Gregg said the latest deficit figures are evidence of "growing the government too much."

Government spending and investment was one of only two positive contributors to GDP (the other was net exports). Does Gregg think the economy would have been better off if Gov't had spent less? Does he seriously think that we would have had a lower unemployment rate?

"This deficit is driven by us. I mean, you talk about systemic risk. The systemic risk today is the Congress of the United States," he said. "We're creating these massive debts which we're passing on to our children. We're going to undermine fundamentally the quality of life for our children by doing this."

The debt represents an asset to investor around the world who hold it. (Double entry accounting, Senator.) Witness the record, $3.45 trillion of U.S. debt holdings by foreigners. The only way for the U.S. to reduce this is to take those assets away from investors who hold them. Would that be good for them?

We are going to undermine the quality of life of our children by allowing our output to remain far below its potential. By definition, we are slowly impoverishing our kids and grandkids. This is the true heritage we are leaving, not the debt, which is an asset to those who hold it.

Senator Gregg makes comments that are flat out ignorant.

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