...And again, we turn to the monster that is the US federal debt:

This article in National Affairs is too long and meandering, but I love this line: "Paying off bonds with currency that is worth half as much as it used to be is like defaulting on half of the debt."

I've been thinking (and saying) for a long time that we will see inflation, not deflation, because the only way to repay the federal debt is to do it with ever-more-worthless dollars: Print too much money, cause inflation, and repay the debt with devalued dollars. Our government is stealing our future from us, in order to keep the balls in the air a little longer. But it is a sucker's game, and at some point it will become obvious to everyone that the US dollar is worthless. And all who hold their wealth in dollars at that time will suddenly realize they are financially ruined.

A sane economic plan would see:

a. Progressive income tax rates that raise enough money to fund the entire government's expenditures for the year;

b. A vast (VAST) reduction in federal spending, which would make it easier to balance the budget;

c. Printing of new money only to the extent of growth in the economy.

And, just for fun, I'll add this one:

d. Make the voting for, or the signing into law of, a deficit budget, a felony.

I suppose that is a very Conservative platform, and yet I am a Progressive liberal. But this liberal wants to see the US continue as a country, and our overspending will ensure our ruin, on our present course, guaranteed. Taxes (the govt's revenue) cover only about 57% of the federal budget--the money the govt spends! Fully 43% is borrowed! Our federal debt is now more than 1.2 times the size of our economy (GDP), and is screaming upward like a rocket.  The only way to repay it is by printing too much new money and then repaying the debt with devalued dollars.  That is what our govt has been doing. And that is indeed the same as defaulting. Bankruptcy. Financial ruin.  

Right now, even the reported inflation rate is far higher than the rate of increase in wages (and the actual inflation rate is probably far higher, because our govt manipulates the numbers to try to keep it looking lower than it is), so workers are losing money big time now, as they very well know from their trips to the grocery store and gas station. These are the victims of our govt's profligacy: The 99% who are not uber-rich. If they understood what their govt is doing to them, they would be screaming in the streets every day until a rational economic program was started.

 But it is amazing that we have so many different economic schools of thought, which collectively don't have a firm handle on how too much debt will affect this country. I guess they will still be arguing after our nation has failed and the revolution into the next social experiment has happened. 

(photo credit: istock)