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It's all about the debt, writes the crack team of Hoisington and Hunt, and the extent to which...

It's all about the debt, writes the crack team of Hoisington and Hunt, and the extent to which the U.S. accumulation of such has been put to use unproductively has them maintaining their bullish Treasury stance. Might the debt be inflated away? Not likely. "The increase in interest rates associated with higher inflation would be one for one ... To start down this road ... would be foolish, impractical, and improbable."
Comments (12)
  • "Debt not inflated away"? Who, then, will pay it off?
    17 Apr 2012, 05:10 PM Reply Like
  • no all you have to do is have a deflationary panic, sell a lot of debt at low rates and then print some dollas with the bondholders helpless
    17 Apr 2012, 05:11 PM Reply Like
  • yep, that's their MO. That's only good as long as the dollar has safe haven status though. The big question is just how long might that last.
    17 Apr 2012, 05:16 PM Reply Like
  • the japanese experience suggests that it can last for decades. The yen isn't even the reserve currency!
    17 Apr 2012, 11:10 PM Reply Like
  • A very fair point. Thanks.

     

    I'll have to consider how similar the two are once I get some sleep. :)
    18 Apr 2012, 04:00 AM Reply Like
  • "foolish, impractical, and improbable"

     

    Be quiet!! That's the criteria for every policy they're making! I hope no one with any power reads this :(
    17 Apr 2012, 05:13 PM Reply Like
  • it has to be subversively with zero forecasting.
    17 Apr 2012, 05:14 PM Reply Like
  • *done
    17 Apr 2012, 05:14 PM Reply Like
  • This is a good writeup. Only thing - instead of referring to it as "government debt" and "private debt", it seems better to refer to it as "private debt" and "shared private debt". Yeah, now I get the picture.
    17 Apr 2012, 07:21 PM Reply Like
  • OK - The government is in complete control of the interest rates on it's debt. That's why we have the FED!

     

    Inflation? It implies that the government would be able to print money. Keep in mind that the estimates of M3 money supply had been shrinking until very recently - and that's despite ultra-low interest rates and "stimulus" debt-spending.

     

    Still, with the future unfunded liabilities being outrageous, if the government wants to produce inflation by paying full social security and Medicare benefits to retirees with further debt-spending, then I bet we could avoid a Japan-style deflation pretty easily!

     

    We have to keep in mind that MUCH of the government's debt is owed to ITSELF in the form of promises to the Social Security Trust Fund. This is simply an accounting gimmick which falsely inflates the appearance of the Federal debt.

     

    It remains to be seen what will happen when the dollars are actually printed and signed over to the benficiaries.
    19 Apr 2012, 09:18 AM Reply Like
  • The rate of growth of m3 was in the negative for about a year. That's an outlier in the last twenty.

     

    It remains to be seen what will happen when the dollars are actually printed?

     

    What always happens when money is printed? *That* is the true meaning of inflation and it's very well understood.
    19 Apr 2012, 10:51 AM Reply Like
  • Yes, exactly, the M3 was negative despite extremely easy monetary policy. It will be the fiscal policy of writing SS checks that may have more power to force the country out of a deflationary-type recession and more toward an inflation.

     

    This won't necessarily happen unless that money ends up chasing goods, i.e. people buy things. If the population continues to save and keep money in cash, then we certainly can head the direction of a japanese style deflationary collapse.
    19 Apr 2012, 01:23 PM Reply Like
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