@brianluce

Click on the link :-)

As for charts - two last charts show the fantasy consequences.

@brianluce

Charts show that all things are still very actual.
Attempt to use electroshock didn't worked.
Btw, all foreign actions of US show that elites do not believe in the cure.

And no mention of the premise behind government borrowing which is to stimulate growth and avoid deflation. Another stimulus package is rumored in the works actually.

LOL. Let me rephrase. I am getting big credit to stimulate my family life level and avoid being homeless. I'll never return this credit, of course. Do not have even slightest intention. Am I smart? Yep I am.
Sorry, I forgot to mention that I use my big two guns to make this clerk lend me this money.

Since it's gone on so long, maybe the government borrowing this author (Charles Hugh Smith) decries is not a fantasy -- more likely, he doesn't understand the nature of government debt and how it differs from personal and household debt. When he writes:

Now that incomes are stagnant for 90% of the populace and interest rates have been slashed, there is no way to increase leverage

he's actually arguing for more government spending, because the only way to "increase leverage" under these conditions is for the government to borrow money (and borrow at negative interest rates, btw) and spend it, which is classic Keynes, government temporarily compensating for lack of demand. This approach violates Hugh-Smith's moralistic view of economics and his fetish for self-sacrifice, but it also happens to work.

Too bad for him, but economics is not a morality play. No country on earth has ever prospered by embracing austerity. If he's got evidence to the contrary, I wish he would present it instead of sermonizing on the evils of debt and the wonders of personal self-sacrifice. In the U.S. at least, the biggest proponents of "sacrifice" are investment bankers and crony capitalist billionaires, like Erskine Bowles and Pete Peterson. But they're invariably talking about other people's sacrifices, not their own.

@Vitaliy_Kiselev

His own charts prove there's no lack of money in the U.S. It's just all going to the top income brackets, so everyone else (including government, thanks to low taxes on wealth) has to borrow.

And yet he wants ordinary people to work at these low wages for 30 years, so by the time they're 50, maybe they can put themselves through college or buy the car they need to get to work with, without having to borrow any money.

Good charts, lousy ideas.

LOL. You turned things upside down. It is exact top income guys who own the goverment, so it is exactly according to their plans goverment borrow money :-)

I think you give them too much credit. What the "top income guys" in the U.S. want is low or no taxes on unearned income, an end to all environmental and financial regulation, and destruction of the welfare state, on the "disaster capitalism" model. Beyond that, it doesn't appear they do much thinking about the long-term consequences of what they promote.

For example, the whole austerity fetish hasn't been all that great for business. But these people are so infatuated with the idea of other people's sacrifices, that they can't give it up. These are the same geniuses who have been insisting for years that the "bond vigilantes" are going to drive U.S. interest rates sky high. If they really believed that for the last 4+ years, and acted on it, they lost a lot of money.

Japan even after huge problems last year had not been allowed to sell their bonds by US.

The "problem" in Japan isn't one of liquidity or lack of demand -- it appears to be an entirely manufactured political crisis, like the "debt ceiling" crisis in the U.S. a few months ago. One political party simply refuses to allow the issuance of new bonds. But there doesn't appear to be any lack of buyers for them.

Otherwise, Japan is instructive. It has very high debt relative to GDP, much higher than the U.S. or Europe, but the Japanese 10-year bond has been paying barely 1% for many, many years (20? 30? longer?), and investors routinely accept negative returns.

Clearly, the common-sense rules of personal finance don't apply to sovereign states. I'm not sure anything is "inevitable".

We could go on forever, since it's all speculation about the future at this point, but I would argue one thing: money has its own psychology. What seems obvious or inevitable on the every day level, simply isn't true in the world of macro-economics or sovereign debt. And there's no morality or justice in economic outcomes, as much as we might wish for those outcomes.

In particular, the common-sense understanding of sovereign debt appears to be all wrong -- based more in evolutionary principles of human psychology, than empirical evidence.

In the U.S, this fallacy was promoted famously by Ronald Reagan, who insisted that the government debt was just like household debt, and that we can't spend more than we take in (which is a phony argument even on its own terms -- tens of millions of Americans have 30-year home mortgages). Meanwhile, Ronnie cut taxes and ran up record deficits.

Maybe it would be better if we threw out everything we think we know about sovereign debt, and start over.

It's very obvious from the first graphic VK posted that the inflationary monitary policy the US has been using is indeed benefiting the top 1-10% the greatest while hurting the poorest the most. Deficit spending is inflationary because politicians on both sides don't want to raise taxes it's bad for votes so they print the money to buy the bonds the country issues to pay for all the wars and welfare and policing the world. Artificially lowering interest rates to "prop up and boost" the economy is really just cheap money for wallstreet to gamble with but too many people like @Jrd are blinded by common sense and buy into "stimulus spending" which is just buying votes from special interest groups and increasing debt levels which is really just a delayed tax increase or delayed inflation, pick your poison either way your taxed more or pay higher prices for everything you need to survive (food and energy) The sooner people figure out both sides work for the same corporations that buy political influence the better everyone is.

I'm either a corporate stooge who doesn't understand that government stimulus is all about special interests and welfare and policing the world, or I'm an idiot religionist who needs to read some books.

I think you are none of this guys, but you really need to read more on this topic.

As for hyperinflation, generally your position with idea to borrow from some unknown source till infinity clearly includes this outcome. And the guys who talk about austerity are the guys who want to make it less hyper and just mega.

Just stop reading Paul Krugman and you will be fine... If printing money worked why didn't printing trillion dollar notes fix Zimbawee ? Why doesn't the US print up quadrillion dollar notes in mass and hand them out to everyone in the world? That would fix everything right? Everyone would be rich... Maybe we need an alien invasion ? http://www.huffingtonpost.com/mobileweb/2012/06/21/paul-krugman-alien-invasion_n_1612973.html

@chazzmoe

I shouldn't have to point out that gold is a speculative commodity. That price may reflect panic, investor sentiment, what some investors think is going to happen in the future or manipulated supply and demand, but historically gold prices rarely track changes in actual cost of living. And current prices certainly don't reflect current inflation or interest rates. Maybe the speculators are right, but they're still speculators and have been wrong in the past. Corrected for inflation, gold is worth less today than it was in 1980. If, for example, gold prices plunged -- it's happened before -- would you accept that your ideas are all wrong? Or does gold prove the point only when it goes up?

If you have really believe in your interest rate and inflation ideas, then I would think you would have been betting on them directly. This would mean shorting long-term treasuries, and holding everything else in cash or commodities -- which would not have been a winning strategy over the last 30 years, when the deficit hysteria began. And would have been particularly unfortunate over the last 4 years.

Of course, you can insist that what you predict is inevitable, that the Western world is going to collapse any day now and the fact that disaster hasn't happened yet just means the time isn't right. Or that because disaster happened to Zimbawe or Michael Jackson, disaster has to happen to us, so what if the circumstances are completely different.

But since that's a prediction which can never be proven wrong, there being no time limit, it resembles an "end of world" cult more than a provable economic theory. You may be proven right, eventually, either because your theory is correct or through the operations of chance (every roulette number comes up sooner or later, if you're allowed to play forever). But those predictions have been failing for a long, long time, with respect to U.S. debt and inflation concerns.

I would never short treasuries, they can keep that ponsi going for a while longer, that's the sucker bet. And yes if you cherry pick gold at it's peak in 1980 then yes you would be right, just don't look at the 2000 years before that or the time since then when it would be a profitable play. People try to compare it to stocks, it's not a stock it's money, compare it to fiat currencies. There has never been a successful fiat currency, EVERY SINGLE ONE has failed in history. I just wish I wasn't broke I would buy some, watching it go up everyday last week was like torture. Its been a fun and spirited debate on a camera forum and I hope you don't take anything the wrong way, I actually hope your right and I'm wrong and everything is fine.