For the 100th episode of the Political Economy podcast, James Pethokoukis sat down with Michael Strain and Stan Veuger during the Ricochet – AEI Podcast Summit in Washington, DC.

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There are 2 comments.

  1. Coolidge

    I have not heard so much Keynesianism in years. This seemed like a discussion from the back of an Econ 101 class. “Grow government” does not work outside the test tube. And, the “Fed did a good job”? Really?? An organization with infinite authority with two tasks: employment and banking stability. The Fed failed miserably on both.
    Horrible and complete failure.

    • #1
    • May 18, 2018 at 6:21 am
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  2. Thatcher

    At 16 minutes Michael (if I have the voices straight) says we should be concerned about the growth of the Federal Budget deficit. Stan challenges him name a reason why we should be concerned. Michael is not prepared with a good answer. I think the obvious answer is that compound interest works the same for debtors as it does for savers. At some point, if you are paying interest by borrowing money you will reach the steep portion of the compound interest curve and you will lose control completely.

    Right now the we have an almost Goldilocks economy. We have good growth, and very low unemployment. But, we have huge deficits and they are increasing. See, John Taylor’s post: https://economicsone.com/2018/07/04/still-exploding-after-all-these-years/ A big part of this is due to entitlements. Social Security and Medicare are spending more than their dedicated taxes bring in. That is not going to change for the better, although it could easily change for the worse.

    As long as things go well, we can continue to tap dance between the raindrops. But, if there is another big recession like 2008 or a war like the wars of the 20th Century, we can lose control of the federal budget, have the debt go exponential and reach a condition where the only ways out are hyperinflation (remember how well that worked for Germany in the 1920s) or a truly horrendous cramdown. The US is far too big to be bailed out by the IMF, and our foreign creditors are not going to accept a settlement for sake of auld lang syne.

    Debt is risk, lots of debt is lots of risk. Accumulating risk in the good times, means disaster in the bad times. It may be the way the American government is run, but it is not at all prudent.

    • #2
    • July 4, 2018 at 9:35 pm
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