It will be a problem if the Chinese and Japanese stop buying because the USD will collapse and capital costs will go significantly higher. In the absence of the foreign buying the government would have to let interest rates sky-rocket, let public and pension funds go under, raise taxes, default on its SS and Medicare liabilities, and cause oil and food prices to explode.

By the way, it is my belief that a significant correction needs to be made so that the malinvestments are washed out and the Federal Reserve System is eliminated. I just don't think that it will happen as long as the government has access to a printing press and has the option of printing money to finance activities because it does not wish to see the taxpayer revolt when taxes are increased.

It will be a problem if the Chinese and Japanese stop buying because the USD will collapse and capital costs will go significantly higher. In the absence of the foreign buying the government would have to let interest rates sky-rocket, let public and pension funds go under, raise taxes, default on its SS and Medicare liabilities, and cause oil and food prices to explode.

By the way, it is my belief that a significant correction needs to be made so that the malinvestments are washed out and the Federal Reserve System is eliminated. I just don't think that it will happen as long as the government has access to a printing press and has the option of printing money to finance activities because it does not wish to see the taxpayer revolt when taxes are increased.

classic cnbc.

Why? You borrow money, you pay back with interest. Been like this for centuries. The laws of every country upholds and enforces it.

Why rough?

Nobody forces the US to borrow money. The whole darn country borrowed with full knowledge of the rules and responsibility.

Why rough?

So trillions were borrowed. Well, what happen to them? Presumably they are now sitting as valuable assets all over the country. The borrowed money should have funded all kinds of things and activities that produced a positive return, right? After all, America is the land of the smartest capitalists in the world. They are the same people who supposedly taught the Chinese to be smart capitalists, right? Paying back borrowed money should be a cinch, since we have the great wise people of the Fed and Wall Street.

So pay 'em back. No need to cry like babies.

That doesn't seem to add up. Same state of affairs at the beginning and at the end, increasing GDP and increasing unemployment. So why was the beginning bad and the end good?

I think Faber makes the most cogent argument for the inflation camp. What's interesting is that his view of how we got here and where we are now is very similar to Steve Keens.

But where they diverge is on the willingness of the Fed to purposely debase the currency.

Faber seems to make the argument that the Fed has aided and abetted a series of bubbles purposely and therefore it's reasonable to expect them to continue down the this track of excessively loose money until there is a crisis.

Keen, I think, would agree they bear responsibility for the bubbles, but that they did it more through incompetence then design. But to purposely debase the currency by letting the helicopters fly would be a purposeful act and that's something no self-respecting central banker is likely to do.

I'm moving into Keen's camp on this, and least for the short-medium term.

Protectionism leads to inflation because it reduces the supply of labor (in the form of internation workers who export cheap goods) within a country, thus reducing presures on wages. Politically, reducing this supply of foreign cheap labor is attractive since this labor doesn't pay ANY taxes at all. Within a country, this inflation would be redistributive. If we assume that the working class would be net winners (they receive high wages that would cancel out the effect of increased consumer good prices), the losers would be people in jobs that aren't affected by import competition in any way who have to buy protected goods. I am willing to assume that most of the top ten percent are people whose jobs are not subjected to import competition, and their demand for goods is relatively inelastic. (They might lose jobs from protectionist retaliation if they are in an export related sector though.) Since the top ten percent composes 40% of consumer spending, this would be redistributed to domestic workers.

If we discount the detrimental international effects of protectionism (by discounting its effects on foreigners while only focusing on the domestic consequences in the utilitarian calculus), one can see how attractive protectionism is even if we do assume a net loss to “society” because of protectionism.