Deficit Deniers & 40-Years Of Economic Erosion

After 40-years of economic erosion, there are still deficit deniers.

The belief that debt and deficits “don’t matter” primarily stems from the basis the economy hasn’t collapsed and become a historical equivalent of Weimer, Germany. However, the rather elementary view fails to distinguish that dropping a frog into boiling water or slowly bringing the water to a boil equates to the same outcome. That latter just takes longer to get there.

A recent article by Barry Ritholtz entitled “Time To Stop Believing The Deficit Bullshit” is an interesting read. It makes a logical argument as to why running massive deficits doesn’t seem to matter. (Such is the basis for Modern Monetary Theory)

“We are told (over and over, again and again) that if we allow the federal government to deficit spend, a parade of horrors awaits us, including:“

  • Excess Federal spending will crowd out Private Capital, choking innovation and new company formation;
  • The costs of US borrowing will skyrocket, making the debt impossible to manage;
  • The US Dollar will be devastated, and it will be radically devalued against all other currencies;
  • All of this will cause rampant inflation, spiking prices to levels not seen before;
  • Deficits will act as a drag on the overall economy;

“It has been 50 years of hearing this — and NONE OF IT HAS PROVEN TRUE. So I am calling bullshit on this — and you should, too.”