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Perhaps a stupid question but given the deficits created by two wars, the post 9/11 spending spree, unfunded tax cuts, TARP, and the first stimulus package why
by jsz0 16y ago
Perhaps a stupid question but given the deficits created by two wars, the post 9/11 spending spree, unfunded tax cuts, TARP, and the first stimulus package why aren't we already deep into an inflationary spiral today? Is there anything to suggest another $1-2T of government stimulus brings us to a breaking point for inflation?
- d2viant 16y agoIt's very simple: People are still willing to lend money to the US government at very low rates because the other areas for investment (i.e. the stock market) are viewed as too risky. Additional government stimulus has little to do with it at this point, that will only come into play when inflation actually hits. When things change and people become more tolerant of risk and less tolerant of low returns, all the government deficits that have been accumulated will become a huge issue. When lenders to the US government start demanding 5%+ on their money, the interest payments on our debt will skyrocket.
- CWuestefeld 16y agoPaying just the interest on the debt takes a significant portion of government revenue, although I don't have citations handy. As that proportion increases (that is, how much of government revenue is spent just on paying for past debt, rather than anything productive), the likelihood of some threshold being crossed increases. But until that point, the government is able to sweep it all under the rug.