Trumped! Washington’s Fiscal Hypocrisy Is Too Rich For Words
By Tyler Durden
Submitted by David Stockman via Contra Corner blog,
You have to love it when one of Donald Trump’s wild pitches sends the beltway hypocrites into high dudgeon. But his rumination about negotiating a discount on the Federal debt was priceless.
No sooner did the 'unschooled' Trump mention out loud what is already the official policy of the US government than a beltway chorus of fiscal house wreckers commenced screaming like banshees about the sanctity of Uncle Sam’s credit promises.
Let’s see. For 89 months now the Federal Reserve has pounded interest rates to the zero bound because come hell or high water the US economy must have 2% inflation in order to grow and prosper. Other than a handful of rubes from the Congressional hinterlands, there is nary a Washington operative from either party who has questioned the appropriateness or effectiveness, let alone the sanity, of Bernanke-Yellen’s 2% inflation totem.
That means, of course, exactly 30 years from today investors would get back 54.5 cents in inflation-adjusted money per dollar of principal on 30-year treasury bonds if the Fed hits its sacred targets.
If that’s not default, it is surely a deeper “discount” than even the Donald had in mind while jabbering to CNBC about his years as the King of Debt.
Oh, yes, the monetary geniuses who peddle the 2% inflation gospel claim we are all in it together. That is, prices, wages, profits, rents and even indexed social benefits allegedly all march upwards at 2% per year, and, save for minor leads and lags in timing, no one is financially worse for the wear.
C’mon. That’s rank poppycock. The truth is, savers get killed and borrowers get windfalls; the wages of upper-end workers keep-up, while the purchasing power of paychecks lower down the ladder shrinks continuously; social security recipients get recompense, private pensioners get shafted. Yada, yada.
Moreover, the biggest windfall harvesters of the Fed’s deliberate debt default policy are the leveraged gamblers of Wall Street and the clueless debt-addicted politicians of Washington.
Even if you grant that the latter have no inkling that the savings function is the key to capitalist prosperity, they do spend a goodly amounted of time waxing about their endless affection for America’s working people. Why, Governor Kasich never finished a single GOP primary debate without claiming he understood how to improve the US economy because his father was a mailman.
So take a look at the graph below on real wages since the Fed went full tilt with the printing press in 2007. This is not a picture of 2% lockstep.
Less educated and lower wage workers have experienced shrinking real wages and for a self-evident reason. On the margin, they are more exposed to the lower nominal wages of foreign goods and services competitors than are workers on the upper end of the jobs and income ladder.
Indeed, the 2% inflation campaign in the real world is the very opposite of the Keynesian lockstep claim. Its incidence among economic agents and classes is actually capricious and inequitable in the extreme.
In fact, it …read more
Source: Trumped! Washington’s Fiscal Hypocrisy Is Too Rich For Words
