The Globe and Mail printed a column by an economist whom I think is particularly out to lunch stating that people were surprised that the reduced corporate tax rates were not resulting in additional capital expenditures and therefore growing economic activity. Hopefully, the reader has now opened up The Limits of Debt and Black Hole Economics and realizes that cutting corporate taxes is not only an approach which cannot produce more activity but worse, makes government balance sheets worse off, adding to the already over-burdened economy.
All that corporations are doing, of course, are buying back stock and not investing – as the Black Hole mathematics clearly underlines must occur. For the American One Percent Party (a.k.a. the Republicans), not only is their platform of cutting corporate taxes doomed to fail, but worse, it is indeed only making things worse for the vast majority of the American population.
My discussion on “How High Debt kills GDP”, BNN, December 13 2011:
In segment 1, I show – and measure – how a high debt load crushes GDP. I introduce the concept of “scientific bankruptcy” and show its implications for the US going forward.
In segment 2, I propose a means by which the debt load of all levels of government could be eliminated. I also ask why economists fear debt reduction when the evidence shows clearly that lifting a massive debt load always results in faster levels of growth.
In segment 3, I discuss Canada’s experience in eliminating the debt burden of its own social security plan, the Canada Pension Plan, and then ‘semi-privatizing’ it. The lessons for Social Security are clear and very promising.
This is a teaser for our upcoming Seeking Alpha post. Click to enlarge.
Stay tuned for the official post once the article is up.
The following post was originally published for Seeking Alpha. The topic of this post is one close to my heart and due to a pressing need to share this knowledge, I’ve decided to publish this exclusively on The Occasional Contrarian instead.
As it becomes increasingly apparent that actually sitting down and dealing with the US debt situation is too much for economists, policy makers, and politicians to cope with, I am starting to see a few economists wondering aloud as to whether we should just leave things be, allow the Fed to send us into a hyperinflation and simply wipe out our debts that way. After all, hyperinflations typically do not last long, and one would tidy up all of that outstanding debt so that the US could start again, fresh, as it were.
A fairly prominent economic commentator, who shall not be named here, cheerfully observed recently that countries that inflate away their debts are not ostracized from the global financial community. After the dirty deed is done, and their balance sheets vastly improved, he found that memories are short, and lenders are delighted to return to lend once again, the financial risks having been massively reduced. With virtually all debts erased, repay-ability is not longer an issue. A little unpleasantness for a wholesale, debt-free, economic renewal seems like a reasonable price to pay!
Anyone who thinks this way, or actually writes such rubbish for popular circulation should have their economics degrees stripped from their walls, and they should be placed in one of those stocks of olden times. Then we’ll encourage the village children to throw rotten tomatoes and mock them. Hyperinflation has devastating consequences for any country that suffers it, and for anyone in the US to even contemplate such a course of action for that country verges on complete madness. Consider what happens in such events.