When I was a Freshman in College, I took a course called Creative Writing. The course was appropriately named, as we did just that. We wrote. I suppose the “creativity” was left up to the reader.
In this case, the reader was my Professor. At the time, I thought she was overly cruel; but looking back, I recognize how constructive her criticism was.
For the final paper of the semester, we were tasked with writing about SOMETHING. You heard me correctly. Write about something and make it long. These weren’t necessarily the directions she gave us word-for-word, but (as a Freshman) my listening skills were sub-par.
As a “know-it-all” College student that, in fact, knew nothing at all, I decided to challenge the idea of Affirmative Action. With a left-leaning liberal grading my paper, this was obviously a brilliant plan. Why couldn’t I write about something less controversial, like guns?
The Sort-of Good Advice She Gave Me
After completely destroying my essay with red ink, she said “Abe- this is completely one-sided.”
“Of course it is. Why wouldn’t it be?”
“You show no understanding of the other viewpoint,” she complained. “I want you to write it again, but this time from the other side.”
At this point I WAS HOT! Not only did I have to re-write my entire paper, but I had to write it from a point-of-view that I don’t agree with. How could my Professor TELL ME what my opinion should be?
The Silver Lining Playbook
As frustrated as I was on that day, I am glad she taught me to “see the other side” because usually one of two things will happen:
1. You might change your mind
2. Your argument will become that much stronger
After that long-winded introduction, I am going to apply this “sort of good advice” to our current economic situation.
I Love our Government. Ben Bernanke is a Genius. And Paul Krugman is my Hero.
I have to admit, I’ve been awfully hard on Ben Bernanke, Paul Krugman and the Government (in general). So, today, I’m going to put myself in their shoes and (hopefully) understand why they think unlimited spending is okay.
Think Like a Donk
We’re about to hit our national debt limit for the 74th time since 1962. For something that happens MORE THAN once each year, I don’t understand why it’s gaining so much media attention. I DO understand that fiscal imbalances aren’t ideal but our main concern should be with the unemployed. 7.7% is a worse figure than the amount of debt we currently carry. Each basis point in that percentage represents hundreds of thousands of suffering families. We can’t possibly look them in the eyes and say “I can’t help you.” So if we can give them money to spend, our economy will pick up and THEN we’ll be able to knock down our debt.
Why is Everyone So Worried About our Debt?
In 1992, our national debt was about $4 Trillion. Our GDP was roughly $6.5 Trillion.
In 2012, our national debt is about $16 Trillion. Our GDP is just under $16 Trillion.
Clearly, our debt is growing at a faster rate than our production. Is that such an alarming thought when we consider how cheap the debt has become?
Think about it…
If an individual or a corporation is encouraged to borrow at “essentially no cost,” shouldn’t the same rules apply to a government?
How Cheap is it to Borrow?
In 1992, our interest payment amounted to 4.5% of our GDP. In 2012, our interest payments only amount to 2.25%. That doesn’t seem that alarming, does it? Our interest payments are about the same as they were 10 years ago, when our debt totaled $6 Trillion.
Think about it…
If you could pay $300/month for an Aston Martin -or- $300/month for a Mazda Miata, which would you choose?
It’s common sense.
What if Interest Rates go up?
What’s neat is that we control interest rates. We have already declared that interest rates will stay low until the unemployment rate falls to 6.5% or inflation surpasses 2.5%.
If inflation goes up, we will simply sell bonds rather than buy them.
Who Will Want to Buy Them?
Everyone. Because US Treasuries are seen as a safe-haven.
Even Though We Struggle to Pay Our Bills, We’re Still Seen as Safe?
Yes. It’s weird. I know, but everything is relative. We are seen as safer than the alternatives.
What if the Alternatives Become Safer?
What if pigs can fly? What if real estate wasn’t guaranteed to go up? To be honest, I haven’t really thought about it. I guess we’ll cross that bridge when we get there.