Onward Toward Default People are hard to please these days. Clients, customers, and cohorts – the whole lot. They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions. The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury secretary garnering plenty of “not guilty of anything/ had absolutely nothing to do with it/ innocent as the snow is white/ just a job title, doesn’t mean a thing” points. All the bad stuff related to public debt and deficits clearly happened before and/or after him, or in other words, he dindu nuffin’ . Similar to the
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Onward Toward Default
People are hard to please these days. Clients, customers, and cohorts – the whole lot. They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.
The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury secretary garnering plenty of “not guilty of anything/ had absolutely nothing to do with it/ innocent as the snow is white/ just a job title, doesn’t mean a thing” points. All the bad stuff related to public debt and deficits clearly happened before and/or after him, or in other words, he dindu nuffin’ . Similar to the discoverers of the way to prosperity of yore, he does however not only know these days what ought to be done, but also what is going to happen. His timing on the former issue may be a bit off, but then again, nobody’s perfect. With regard to the latter, he should definitely try his hand at stock market trading given his new-found powers of perfect foresight. [PT]
The recently retired always seem to have the biggest ax to grind. Take Jack Lew, for instance. He started off the New Year by sharpening his ax on the grinding wheel of the GOP tax bill. On Tuesday, he told Bloomberg Radio that the new tax bill will explode the debt and leave people sick and starving.
“It’s a ticking time bomb in terms of the debt. The next shoe to drop is going to be an attack on the most vulnerable in our society. How are we going to pay for the deficit caused by the tax cut? We are going to see proposals to cut health insurance for poor people, to take basic food support away from poor people, to attack Medicare and Social Security. One could not have made up a more cynical strategy.”
The tax bill, without question, is an impractical disaster. However, that doesn’t mean it’s abnormal. The Trump administration is merely doing what every other administration has done for the last 40 years or more. They’re running a deficit as we march onward towards default.
We don’t like it. We don’t agree with it. But how we’re going to pay for it shouldn’t be a mystery to Lew. We’re going to pay for it the same way we’ve paid for every other deficit: with more debt.
A Job Well Done
Jack Lew of all people should know this. If you recall, Lew was the United States Secretary of Treasury during former President Obama’s second term in office. Four consecutive years of deficits – totaling over $2 trillion – were notched on his watch.
Did he ever mention the debt ticking time bomb when he had the opportunity to do something about it? We don’t remember ever hearing this debt bomb allusion from Lew while he was Treasury Secretary. Do you?
We do remember, however, that as part of his job he had to place his autograph on the face of the Federal Reserve’s legal tender notes. Did it ever occur to Lew that, in so doing, he was publicly endorsing and personally ratifying unconstitutional money with his very signature?
Most likely, it never crossed his mind. And if it had, the illegality of the paper dollar certainly didn’t bother him enough to prompt his resignation and the pursuit of honest employment. He did none of these things.
Instead, Lew played his part to perfection. That is, he rolled over year after year in his quest for the expedient. He did the job everyone wanted him to do. He did a job well done.
Likewise, now that he’s off the clock he’s sounding the alarm on the nation’s debt problem. According to Lew, it’s all Trump’s fault. Not his.
As an aside, we don’t necessarily take issue with Lew’s assessment of the tax bill and the ticking time bomb metaphor. What we take issue with is the timing of his two-faced utterances.
Das Jack Lew in a nutshell. Nobody really remembers Jack Lew, mainly because he wasn’t very memorable. Even G.W. Bush’s short-lived and completely inconspicuous treasury secretary Paul “Money can be ath Lethal ath a Bullet” O’Neill is remembered more widely as far as we can tell. Lew (a.k.a. “Whatshisname” to most people) was reportedly a “fat cat banker” whom Obama lured away from Citigroup. Despite his presumed professional qualifications, certain basic arithmetic operations such as addition were apparently not really his thing (see above). His main claim to fame was his strange signature, which looks like an endless row of zeros looped together and was at one point suspected of possibly accelerating the inexorable devaluation of the US dollar. The pseudo-scientific field of graphology was beside itself with excitement, and we suppose money counterfeiters must have salivated over the prospect of being able to forge his signature with the help of a slinky. He wasn’t even very good at deflecting criticism over the fact that the IRS was misused to target political opponents of the administration. He simply asserted that this particular bureaucracy was outside his purview, which it apparently had in common with the deficit under his watch. [PT]
Why You Should Embrace the Twilight of the Debt Bubble Age
In truth, no one really cares about deficits and debt. Not former Treasury Secretary Jack Lew. Not current Treasury Secretary Steven Mnuchin. Not Trump. Not Obama. Not your congressional representative. Not Dick Cheney.
Plain and simple, unless there are political points to score like Lew was aiming for this week, no one gives a doggone hoot about the debt problem. That’s a problem for tomorrow. Not today.
Quite frankly, everyone loves government debt – DOW 25,000! Aging baby boomers know they need massive amounts of government debt to pay their social security, medicare, and disability checks.
On top of that, many employed workers are really on corporate welfare. They’re dependent upon the benevolence of government contracts to provide their daily bread.
Dick Cheney once said something politicians of all stripes just loved to hear. There is a problem with the idea though, despite the fact that it seems as if he was right so far (not even that is true actually, because the federal debtberg has a great many “unseen” effects – and none of them are good). [PT]
What’s more, in this crazy debt based fiat money system, debt must perpetually increase, or the whole financial system breaks down. Specifically, more debt is always needed to keep asset prices inflated and the wealth mirage visible.
By providing a quick burst to the rate of debt increase, President Trump expects to get a quick burst to the rate of GDP growth. We suspect President Trump and his followers will be underwhelmed by what effect, if any, the tax cuts have on the economy. Time will tell.
In the meantime, don’t fret about government deficits and debt. Political leaders may say deficits don’t matter. But they do matter. In fact, soon they’ll matter a lot.
We’re in the twilight of the debt bubble age. Embrace it. Love it. What choice do you have, really? There’s nothing Jack Lew – or anyone else – can do about it.
A couple of cartoons by Michael Ramirez on the debt tsunami bearing down on the US… as the Greeks found out to their chagrin, deficits and debts don’t matter until they do. That is the main problem with Dick Cheney’s notion – everything goes perfectly well for a long time, but that creates a completely unwarranted illusion of safety. The unknowable threshold that has to be crossed for the public debt to become a glaringly obvious problem, is only crossed once after all – at the very point at which it is definitely too late to deal with it. [PT]
Image captions by PT
MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.