Tag Archives: Jack Lew

Why You Should Embrace the Twilight of the Debt Bubble Age, by MN Gordon

How will America pay for the recently enacted tax reform bill? The same way it pays for everything else: with debt. From MN Gordon at economicprism.com:

People are hard to please these days.  Clients, customers, and cohorts – the whole lot.  They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.

The recently retired always seem to have the biggest axe to grind.  Take Jack Lew, for instance.  He started off the New Year by sharpening his axe on the grinding wheel of the GOP tax bill.  On Tuesday, he told Bloomberg Radio that the new tax bill will explode the debt and leave people sick and starving.

“It’s a ticking time bomb in terms of the debt.

“The next shoe to drop is going to be an attack on the most vulnerable in our society.  How are we going to pay for the deficit caused by the tax cut?  We are going to see proposals to cut health insurance for poor people, to take basic food support away from poor people, to attack Medicare and Social Security.  One could not have made up a more cynical strategy.”

The tax bill, without question, is an impractical disaster.  However, that doesn’t mean it’s abnormal.  The Trump administration is merely doing what every other administration has done for the last 40 years or more.  They’re running a deficit as we march onward towards default.

We don’t like it.  We don’t agree with it.  But how we’re going to pay for it shouldn’t be a mystery to Lew.  We’re going to pay for it the same way we’ve paid for every other deficit: with more debt.

A Job Well Done

Of all people, Jack Lew should know this.  If you recall, Lew was the United States Secretary of Treasury during former President Obama’s second term in office.  Four consecutive years of deficits – totaling over $2 trillion – were notched on his watch.


To continue reading: Why You Should Embrace the Twilight of the Debt Bubble Age

He Said That? 2/11/15

From Jack Lew, US Secretary of the Treasury, from a meeting of G-20 finance ministers and central bankers in Istanbul, Turkey:

In Europe, there’s a need for more fiscal policy. There’s a demand shortfall.

The Wall Street Journal, “Currency Warriors Get Boost From Finance Leaders,” 2/11/15

It’s a wondrous thing when two sentences can capture virtually everything that is wrong with contemporary economics, as practiced by developed countries’ finance ministers and central bankers.

Start with the notion of demand shortfall. What does that phrase even mean? That there are too much goods and services relative to the demand for them? In free markets, prices fall until markets clear at a price where supply and demand meet. Falling prices have been forbidden in modern economics, although it stands to reason than technological advances and other productivity enhancements would exert continuous downward pressure on prices (which is what happened during the span of the Industrial Revolution, the freest the US economy has ever been).

So yes, if prices can’t fall you’ll get a “demand shortfall.” The only way to remedy it would then be by some means other than the price mechanism. If you guessed those means would involve some sort of government action, compliments on your perspicacity. According to Mr. Lew, that means “fiscal policy.” Now fiscal policy can mean the government takes less in taxes, putting more money in people’s pockets, which would increase demand. However, in modern economics, fiscal policy means more government spending, funded by debt, which is then bought by the central bank (debt monetization), to achieve a desired inflation rate and level of demand.

In the last 6 years, governments have issued, and central banks have monetized, more debt than ever before in the whole history of mankind, probably more than all the prior millennia put together. The recovery from the financial crisis has been one of the weakest on record, but the attendees at the Istanbul confab agreed that was needed was still more debt, monetization, and currency depreciation. There were no announcements as to if, when, or how the world is supposed to get off this merry-go-round. SLL is, of course, betting that the it comes to an abrupt stop and the riders on their horsies get thrown off, hopefully sustaining massive injuries in the process. There has to be some consequences for rampant idiocy.