If interest rates were at a formerly not unreasonable level of 5 per cent, that would take a bite of 1 trillion out of the federal budget. Not possible, as that is approximately the level of military and social welfare spending combined.
So, it would put the US on a fast downward spiral to huge indebtedness. The only way out would be the hidden tax of inflation, since federal lawmakers just can't summon the wherewithal to balance the federal budget.
Alternatively, the US could follow the lead of Japan, and take back seigniorage from the banks, funding the federal government directly, and removing interest on the national debt from consideration.
This is problematic for the US, however, since unlike Japan, we have a negative balance of trade, and we balance it by issuing debt. If we had to instead directly issue money from the Fed, we would eventually end up in the situation that Zimbabwe ended up in.
So, to sum up, a rock and a hard place. comment by usgoosht on Fed should get on with its interest-rate tightening, global-economy experts Rajan and Rogoff tell MarketWatch Jan 8, 2017 9:27 PM [GMT]
Not hard to understand how the non-Muslim population of Pakistan has dropped from almost a quarter to low single digits since independence. comment by usgoosht on Pakistani activist fears he will be killed like his father over blasphemy Jan 3, 2017 9:42 PM [GMT]
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