January 18, 2009
So we are deep into a recession, with no particular end in sight. Obama has promised to jack up the governments debt already. The trade deficit is still stratosphere high. Tax cuts promised too, unemployment rising fast, and economists are worrying about deflation.
Something in those numbers doesn't add up, does it?
Right now the whole situation is staying afloat based on the fact that the US government can borrow money in a currency it also funnily enough can print itself. As long as they can keep doing that, deficits don't mean jack, we can get all the money it's shipping away back for the price of some paper and ink.
Then again the government has lowered interest rates to practically zero, how long will it be able to borrow money at those rates?
Raising rates means putting a squeeze on all the individuals and companies in the US currently deep in debt. Raising taxes to pay debts just sucks money out of the US economy. Maybe the economy just does a 180 and exports pick up, revenues rise and things correct. Or maybe the US Government really can borrow forever for free. Neither seems particularly likely though.
Things continue on a course like we see today and I have to wonder if we are charging fast towards the end of the free trade era. The government needs revenue, and they want to do it with taking that money out of the country's economy. The country needs jobs, the government is worried about deflation and the economy is net bleeding billions due to it's trade deficit. I'm not really one to predict the future, but are we looking at a big time return of the tariff?
edit (05/10/2009): Well a 100+ days past this entry and it's clear that tariffs are not high on the agenda, yet. It's all about the Federal government borrowing money and printing dollars and likely will be until either recovery or collapse of that system let's see how this plays out...Posted by Abe at January 18, 2009 01:26 PM