Hyperinflation is directly related to money creation. You can’t get one without the other. All other aspects of Zimbabwe relate only to the motivation of the government to create the money.
Do you believe that the EUROZONE can solve its collective problems by simply creating money and buying up the debt? It is certainly possible that we may get a ring side seat on the result in the next year or two. Why do you think it hasn’t occured to them?
[quote=DomoArigato][quote=sreeb]
I agree that our situation is not now similar to Zimbabwe although I would argue that it could become similar if we engage in large scale monetization.
[/quote]
Nope. In order for the U.S. situation to become similar to Zimbabwe manufacturing capacity would have to fall by 63%. I feel very confident that debt monetization alone would not cause manufacturing capacity to drop by 63%.
[quote=sreeb]
As for Portugal, Italy, Ireland, Greece, and Spain, it isn’t clear that we are much better off and in some areas we are worse.
[/quote]
The U.S. is better off than all these countries because our debt is denominated in dollars and we own a dollar printing press that will allow us to print money and pay off our debts. Each of the above countries has their debt denominated in a currency which they do not control.
FY2010 U.S. Federal Tax Receipts = $2.1T
FY2010 U.S. Federal Spending = $3.5T
Income tax (corporate and individual) was only $1.1T. Did you also intend to double Social Insurance taxes $0.9T?
[quote=sreeb]
Even doubling our tax rate wouldn’t completely eliminate the deficit if it actually doubled revenue (which it wouldn’t).
[/quote]
Wrong!
FY2010 U.S. Federal Tax Receipts = $2.1T
FY2010 U.S. Federal Spending = $3.5T
2.1 x 2 = 4.2
[quote=sreeb]
We would have immediate severe problems today if we had to pay the interest rates those countries are currently paying. Interest rates that are similar to those we have historically paid.
Historically, we have paid an average of about 6% on federal debt. At 6% * $15T = $900B in interest alone. The average maturity of federal debt is ~4 years. If interest rates went above 6% we would be completely screwed.
[/quote]
Ahhh, yes, the problem of the invisible bond vigilantes. The Federal Reserve has already shown that they can lower interest rates by buying Treasury bills. Problem solved.[/quote]
Just because they can do this in the short term at a time when our currency appears relatively safe does mean they can do this forever, particularly as our financial condition continues to deteriorate.
