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Debt Never Sleeps November 10, 2014 10:00 AM | Tagged as O'Reilly
WSJ 11/3/2014, Page A15: “Missing the Prime Suspect in Global Slowdown” by George Melloan
Mr. Melloan is a former deputy editor of the WSJ editorial pages. He cuts to the chase about the deepening economic doldrums. The Keynesians are losing the argument. Debt is sinking the ship and they are on it. He writes, “The world debt, as a percent of GDP, has jumped 36% since 2008, to a record high of 212%.” Much of that is government debt from continued allegiance to Keynesian spending. The economic blip that such spending drives is short lived, leaving in its wake a mountain of debt. Paying this growing interest bill sucks the life out of an economy. Debt and interest never sleep. We are in for a long recovery until growth provides the underlying economy to pay down the debt burden.
Melloan also mentions that many economists believe the flood of much expected inflation has been dammed up by Dodd-Frank laws giving the Fed powers to limit bank lending. The Biz Bucks Guy believes this artificially sterilizes money. Once the dam breaks, inflation will result.
Melloan also provides a short summary of the reason for the 2008 recession that still haunts us. “The Fed well remembers what happened in 2006 when belatedly raising rates to a normal level caused pumped-up housing prices to fall. But it perhaps forgets that the most important factor in the 2008 crash was that falling house prices exposed the frailties of the many billions of dollars of toxic securities in circulation, held by the likes of Lehman Brothers, that were based on subprime mortgages engendered by government affordable-housing policies.”
Maybe Bill O’Reilly of Fox News Channel should read and memorize that paragraph. He grossly oversimplifies the 2008 crash as being caused solely by greed on Wall Street.
[Although opinion is included, The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]
Posted in MacroEconomics, National Debt | 0 Replies
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