The New CS Board

[jumanji0881]

Doug Noland's weekly Credit Bubble Report at http://creditbubblebulletin.blogspot.com/

Weekly Commentary: Short-Term Unsustainable

My Comment : Try raising taxes when the stock market bubble bursts and the economy is in a depression.

Excerpts:
Senator John Thune (from Yellen’s confirmation hearing): “I’m going to try and roll a lot of thoughts and questions into sort of one big package here. But the one thing that concerns me that nobody seems to be talking about anymore is the massive amount of debt that we continue to rack up as a nation. And, in fact, the President elect has proposed a couple trillion dollar fiscal plan on top of that which we’ve already done - which would add somewhere on the order of about $5.3 trillion to deficits and that’s according to the committee for responsible budget of which you have been a board member.

That’s 25% of GDP, and it would move the additional debt above 100% debt to GDP

And at some point, the risk/return ratio, that people who are lending us money are going to say, is not sufficient for the risk, and they’re going to demand a higher interest rate. That will happen at some point. Interest rates will start to normalize, and we have to refinance at a higher interest rate. And pretty soon the interest on the debt exceeds what we spend on even national security for our country.

Washington has employed massive fiscal and monetary stimulus despite ultra-loose financial conditions and booming markets. The big crisis commences – the unsustainable is no longer sustained - when financial conditions tighten and the financial Bubble bursts. The time for “acting big” is in a post-Bubble backdrop and definitely not while the Bubble is inflating madly.