He began with some tough inflation talk and then reiterated his concerns about our inability to be able to pay our current Social Security and Medicare debt obligations. The total costs of these programs are going to be $99 trillion dollars or $333,000 per person according to Mr. Fisher!
This is his famous speech from a few weeks ago that I highlighted here. There is also a link on the page that provides a copy of the whole speech.
Mr. Fisher basically reiterated on CNBC that the temptation for government to try and hyper inflate out of this debt will be there, but that there is no way in hell that the central bank will allow it. The Fed will force massive deflation before ever allowing this nightmare scenario to take place IMO.
This is how bad a shape are government is in financiallyfolks. Our government balance sheet looks worse than Bear Stearns!! Fisher demaded on CNBC that we MUST figure out how we are going to pay off this $$99 trillion debt obligation NOW, or we could find ourselves in deep trouble!!!!
My Take:
I applaud Mr. Fisher for going on CNBC and bringing this issue to light. The reason paying off this debt obligation never gets talked about is because no politician wants to be associated with the solution.
Why? Because its going to involve a lot of financial pain and sacrifice by every American, and that is political suicide for a politician. As we know, they are all about getting re-elected rather than doing whats best for this country.
Sometimes I wish we could just put an anonymous mailbox in the middle of Congress. This way, politicians could then drop their ideas for fixing our economic problems in a box and not be associated with it!
We then could finally have real debate about getting this country out of debt and start fixing the economy. If we don't deal with all of this now its going to be worse later. This includes fixing Wall St.!
Hopefully, Mr. Fisher can politically start making Congress face $99 trillion issue that he says "dwarfs the credit crisis".
7 comments:
FED loans a dollar to government, if they were concerned about that debt they would stop issuing new dollar notes.
Try searching M3 money supply figures for last year, than ask yourself a question why you can't it.
It's easy to loan wotheless paper buck than complain that they have loaned too many of them.
It's definitely a long looming problem, which FED has created them selfs.
Jeff - great post before (long before the news picked this up).
I must reiterate that I think this country sooner or later has to embrace socialized medicine. When I lived in England, I hated the concept and the cost, but we're seeing greater cost and less success here. I never thought I'd say this but the US system is broken and the rest-of-world model has got to be the way to go.
1. We spent $300mm a day on administration alone.
2. The drug companies are laughing (eg. Allegra D here is $100 but in Spain it costs $5, because the drug companies can't gouge people there the same way).
3. One fifth of the population has no healthcare. Nobody with good conscience can accept that, surely?
4. US healthcare cost is 6x the European average (and 15x the Asian average, where more and more Americans are going for procedures).
This huge bill can only be handled by facing the reality on healthcare. In the same way that the fire department became socialized and it works, healthcare must go this way.
Believe me, I hate taxes and hate government involvement in things, but the private healthcare model in the US is broken. My wife works in it and it's a license to print money and screw patients.
While this is way down the list of priorities to talk about, given all the other issues, clearly a $99tn bill is not palpable or payable.
We have to find some way to pay for all of this stuff.
I have heard good and bad on National healthcare.
Can America afford the 50% tax rate that Canada pays? I know a couple of Canucks that hate it.
We would have to reset the economy at lower prices to afford it. We do need to do something with health care.
I am just not sure what the best choice is.
Art
M3 is the hyperinflation arguement that John Williams runs around with. I doubt the FED would try to print out of this.
I think thats what Fisher made that clear today by saying this will not happen.. M3 is not as reliable a number based on how the FED is setup.
One good example of hyperinflation versus deflation is the 1930's depression in Europe.
Germany tried the hyperinflation route and ended up with Hitler because people couldn't afford to eat.
England had the same problems as Germany but decided to shrink the money supply and allow deflation to devalue assets similiar to what Japan did.
Obviously the English way is much less painful.
Hyperinflation could happen if we get desperate enough, but I highly doubt it because it destroys everything including the government that allows it to happen.
Those politicians want to stay in office so expect us to go the deflation route IMO.
What no one really talks about is how the SS got into its mess. Congress has been stealing from it for decades now, ever since they passed the lock-box legislation which prohibited that. They simply dodged it by issuing IOU's. The system would be fine if all the moeny contributed were still available.
Gene
I agree. The government has been spending like a drunken sailor just like we have the last couple decades.
Its time to pay the piper!
Jeff, thanks to your previous post, I had read Fisher's remarks word-for-word. Curious. Wouldn't someone with his background & stature be in a position to offer some concrete suggestions on paying back this money? That he did not offer any in his lengthy piece was telling, I felt. Now, neither Prez candidate nor many members of congress have a stronger background in finance then him, so I don’t think he's seriously expecting solutions to come from them. And certainly not from us the masses...nor greedy myopic Wall Street.
So ... he brings up the subject....warns us of the magnitude of the problem and on how cutting all non-discretionary expenditure plus a 67% increase in taxes wont fix the problem...and offers no solution. Curious. He reminds me of a character in a Greg Bear Sci-fi novel.
avl
Well said. I think he knows the solution but he doesn't want to be the "messenger".
Did he send a warning shot across the bow before he starts talking about what needs to be done?
It sounds like a very political situation IMO.
I hope that he starts talking if everyone continues to ignore it.
His words were very powerful in that speech IMO. Lets hope he starts to back it upffbgd
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