June, 2010 Archives

17
Jun

The Fiat Empire

by Riaan Nel in News

follow-the-moneyKeith McCullough from Hedgeye recently sent out the following news letter about the Western world’s debt.  The comparison he is making to the last days of Rome is intriguing.  I am not yet worried about the level of US debt, however, I am terrified about the long-term implications of our unfunded liabilities (specifically Medicare).  For those of you familiar with the theories of Hyman Minsky you understand that a government has to run a deficit during a recession to try and offset the precipitous dip in aggregate demand.  However, before you start sending me emails about the fallacy of Keynesian economics, I want to be very clear that obviously not all deficits are created equal.  Some government spending programs are more conducive to spur aggregate demand compared to others.  The latest Administration proposal to borrow money to prop up state and local governments is not the most efficient allocation of deficit dollars.  Immediately suspending payroll taxes is a much better strategy in my mind.  This should coincide with increases in the age for Medicare and social security eligibility.  Here are some of McCullouogh’s thoughts…

Not unlike those of the Roman Empire, the political fathers of the modern day Fiat Empire purge their citizenry’s hard earned capital in order to attempt to maintain short term popularity. When they run out of funds, they simply borrow more. Then they spend that too. Read the rest of this entry »