An alternative to popular faith
If even Paul Volcker doesn’t get it, how can the man in the street hope to understand — unless the man in the street is willing to look at the facts and Volcker isn’t?
“5/19/2001: STANFORD, California (Reuters) – Europe’s debt crisis shows the risks for the United States if it does not get its budget deficits under control, former Federal Reserve Chairman Paul Volcker said on Tuesday. ‘If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain political cohesion of Europe,’ Volcker said.
[...]The U.S. budget deficit hit $1.4 trillion in 2009, roughly 10 percent of the economy. The White House projects the deficit this year will reach $1.6 trillion. The large deficits have evoked comparisons to Greece. But in a speech to the Stanford Institute for Economic Policy Research in California, Volcker said the United States differs from that country and other small European countries whose credit markets have come under speculative attack. Unlike those countries, the United States benefits from well-established currency and credit markets that are considered safe havens in times of financial turmoil.
[...]’There are serious questions, most immediately about the sustainability of our commitment to growing entitlement programs,’ said Volcker, who heads an outside panel of experts advising Obama on the economy”.
Here is Paul Volcker, who of anyone, should know better, saying the difference between the U.S. and European countries is we have a well-established currency. No, Mr. Volcker, the difference is we are a monetarily sovereign nation and the EU countries are not. And that difference makes all the difference.
Somehow, the fact that we are running trillion-plus deficits, with none of the problems the EU nations are experiencing, doesn’t seem to penetrate Mr. Volcker’s skull. He has the debt hawk’s “It-hasn’t-happened-yet-but-I’m-sure-one-day-it-will” mentality, rather than the scientist’s “It-hasn’t-happened-yet.-I wonder-why” mentality.
Mr. Volcker, the reason “it” (inability to service national debts) happened to Greece, but not to the U.S., is simple: The U.S. has the unlimited ability to pay its bills, merely by crediting creditors’ bank accounts. EU rules prevent Greece from doing this. Either Mr. Volcker truly doesn’t understand the difference, which would be remarkable, or he has been paid to adopt a debt hawk agenda that forces him to close his eyes to basic fact.
Anyone who says Greece’s problems foreshadow similar problems for the U.S. either is ignorant of the facts or a liar.
And by the way, for those debt hawks who keep warning us that deficits cause inflation, we’re running the deficits, but: “5/19/2010: WASHINGTON (AFP) – US consumer prices fell for the first time in 13 months in April, the government said Wednesday as analysts warned of the risk of deflation in the world’s largest economy.” Isn’t it inconvenient the way facts seem to get in the way of wrong opinion?
Rodger Malcolm Mitchell
No nation can tax itself into prosperity