- We just had a massive commitment of new funds towards the Wall Street bailout.
- Tax revenues are going to take it in the crotch over the next few years, as companies take enormous losses. No income, no income tax. It doesn't matter if the Democrats raise rates. 90% of $0 is $0. Ask Ben.
- Interest rates are insanely low and likely to rise with the ballooning deficit and falling dollar.
Friday, October 31, 2008
The Amero and The Economist According to Scott
I was simply going to add a comment to Ben's entries, but I decided there was a bit too much for a simple comment. First off, let me say that Ben is really surprising me with the depth of his research into these blog entries and the skill of his argumentation. I'm glad he's on board with us. But I have one pressing question for him: why in the world are you an accountant? Despite this formidable performance, however, I will have to disagree. That's some temerity on my part, isn't it? Would you go up against an article like that? Let me begin by noting that The Economist is a right-leaning British magazine, and a fine publication at that, but that is a far different thing from having a right-leaning perspective here in the States. I think The Economist is about as conservative as Bill Clinton, to put it in better perspective. It is not communist, but it is far from lasseiz-fair. It is consistently greener, anti-gun, and pro-government interventionism than most any American conservative I can think of. As I recall, it called McCain a fine candidate and the best choice among the contestants in the Republican primary only a few months ago. That should serve to strike any American conservative as a blow to The Economists supposedly "right-leaning" credentials, as many on the right consider McCain a RINO at best or an outright traitor to the cause at worst. I know of almost no conservatives here who are happy with their candidate. Like the liberal American media, it doesn't surprise me that The Economist treats McCain as the best Republican around, but given its druthers, it chooses an Obama over him. Concerning the Amero: It is true that the US dollar is doomed. Let's do a few back-of-the-envelope calculations, shall we? First, the US GDP is about $14 trillion, and on budget debt is about $10 trillion. Currently, the fraction of GDP consumed by government (govt spending) is about 20%, putting the federal budget at about $2.8 trillion, give or take. The budget deficit over the last few years has been about $300 billion /yr (and rising), giving tax revenues at about $2.5 trillion. None of the deficit counts, of course, social security and medicare, as it is "off the book" debt, since the money has not yet been spent, even though it is just as much an obligation as true debt. (Note: I'm doing this off the top of my head. I've been searching for solid numbers, but they seem to be scattered about the internet so randomly I'm having a hard time locating what I need. If anybody has good links, please send them to me!) Now, that is the current status of things. The important thing determining bankruptcy is loss of cash flow. Presently, interest rates are low. Extremely low. Downright suppressed. Which is one of the reasons the US govt has taken on new debt the past few years with little reservation. The interest rate on the debt is in the ballpark of 3% or so. 3% of $10 trillion is about $300 billion, or about 10% of federal outlays, which we had at $2.8 trillion. This jibes well with the 8% figure I just saw on the 2006 1040 Tax schedule, so I must be doing this right! This is ok, actually. Not that bad. But we need to remember a few things: