You have to love
it when one of Donald Trump’s wild pitches sends the beltway hypocrites into
high dudgeon. But his rumination about negotiating a discount on the Federal
debt was priceless.
No sooner did the unschooled Trump mention out
loud what is already the official policy of the US government than a
beltway chorus of fiscal house wreckers commenced screaming like banshees
about the sanctity of Uncle Sam’s credit promises.
Let’s see. For 89 months now the Federal Reserve has
pounded interest rates to the zero bound because come hell or high water the US
economy must have 2% inflation in order to grow and prosper. Other than a
handful of rubes from the Congressional hinterlands, there is nary a
Washington operative from either party who has questioned the appropriateness
or effectiveness, let alone the sanity, of Bernanke-Yellen’s 2%
inflation totem.
That
means, of course, exactly 30 years from today investors would get
back 54.5 cents in inflation-adjusted money per dollar
of principal on 30-year treasury bonds if the Fed hits its
sacred targets.
If that’s not default, it is surely a deeper “discount”
than even the Donald had in mind while jabbering to CNBC about his years as the
King of Debt.
Oh, yes, the monetary geniuses who peddle the 2%
inflation gospel claim we are all in it together. That is, prices, wages,
profits, rents and even indexed social benefits allegedly all march
upwards at 2% per year, and, save for minor leads and lags in timing, no one is
financially worse for the wear.
C’mon. That’s rank poppycock. The truth is, savers get
killed and borrowers get windfalls; the wages of upper-end workers keep up,
while the purchasing power of paychecks lower down
the ladder shrinks continuously; social security recipients get
recompense, private pensioners get shafted. Yada, yada.
Moreover, the biggest windfall
harvesters of the Fed’s deliberate debt default policy are the
leveraged gamblers of Wall Street and the clueless debt-addicted politicians of
Washington.
Even if you grant
that the latter have no inkling that the savings function is the key to
capitalist prosperity, they do spend a goodly amounted of time waxing
about their endless affection for America’s working people. Why Governor Kasich
never finished a single GOP primary debate without claiming he understood
how to improve the US economy because he father was a mailman.
So take a look at
the graph below on real wages since the Fed went full tilt with
the printing press in 2007. This is not a picture of 2% lockstep.
Less educated and
lower wage workers have experienced shrinking real wages and for a self-evident
reason. On the margin, they are more exposed to the lower nominal wages of
foreign goods and services competitors than are workers on the upper end
of the jobs and income ladder.
Indeed, 2%
inflation is the very opposite of the Keynesian lockstep claim. It’s incidence
among economic agents and classes are actually capricious and inequitable
in the extreme.
In fact, it is a grand policy scheme of random monetary
default. But since the Donald had the temerity to broach the topic—whether by
inadvertence or by purpose—–the spendthrifts of the Imperial City are now
scrambling to smother us in a verbal blanket of phony
fiscal rectitude.
In that regard,
there are few more noxious precincts of statist fiscal hypocrisy than that
occupied by the ranks of scribblers and bloviators at Politico.
By the lights of
these folks, everything that has been done in the Imperial City these last
several decades should have been done. Certainly, there is no fiscal crisis
that might warrant radical ideas like those proffered by Trump.
Why Obama, the
Fed and the Congress actually saved the country from Great Depression
2.0 in 2008-2009. Since then, in fact, we have been marching
resolutely toward economic recovery and fiscal stabilization.
No, not even
close. There has been no meaningful economic recovery and the fiscal
condition of the nation is frightful.
As to the former,
there are still fewer full-time, full-pay “breadwinner” jobs than before the
crisis. Likewise, the median household’s real income is still
far lower than when the previous Clinton was shuffling out of the White
House In January 2001…….
Full text at: Trumped!
Washington’s Fiscal Hypocrisy - LewRockwell
