South central kansas |
I agree "debt saturation" past a certain point has a wealth destroying effect and I will also agree that the transfer from the private to public sector(government) has a "theft" component, I will post what I posted several weeks ago about this very subject.
As I have long been saying, the risk of long term negative consequences, as a result massive government spending are fast approaching. There is simply, no way that prosperity, is the result of massive spending, as the following link from Hoisington investment management makes clear. http://www.hoisingtonmgt.com/pdf/HIM2010Q1NP.pdf Contradictory Fiscal Policy "The federal government cannot create prosperity by spending funds that it does not have. It can, however, spend us into poverty by taking dollar balances from highly productive individuals and their business entities, through borrowing or taxing. This process of transferring these assets from income and wealth generators to other government applications has profound economic consequences. Economists from David Ricardo (1772-1823) to John Maynard Keynes (1883 to 1946) to present day scholars have theorized about what this massive transfer of resources from the private to public sector does to overall economic conditions. Our read of history, economic theory, and mathematics leads us to one clear conclusion. The “taking” of funds by central governments to be redistributed to other priorities is, in the end, contractionary. Viscerally, the normal reaction to a massive increase in government spending is to assume it is an inflationary event, particularly in the U.S. where amounts have been so large over the past ten years (Chart 1). Has this huge spending shift from 18.4% of GDP in 2000 to 24.7% today made the U.S. more prosperous? The results are unequivocal. Inflation today is 1.3% versus 1.7% ten years ago (core PCE deflator.) The percent of the population working today is 58.6% while prior to the large budget deficit spending of the last ten years it was 64.6%. Our GDP was growing at 4.8% ten years ago, and today we are staggering out of recession. History displays the same pattern in other countries where excessive government deficits have been implemented. The modern example is Japan. Its government debt soared from 52% of GDP in 1989 to 184% today (Chart 2). The economic results: GDP in that country is no higher than it was 18 years ago; its employment is no higher than it was 19 years ago, and there is no inflation since consumer prices are at 1993 levels." |
Interesting
