The stagflation of the 1970s was chicken feed compared to what Obama has concocted.
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But the problem is much bigger than the 1970s style inflation trap that President Obama and his supporting cast of left-wing flower children have worked us into. For America is financially much weaker today, with government spending, deficits and debt dwarfing anything America suffered in the 1970s. And the world is far less stable than then, financially, economically and politically. Moreover, America suffers far more virulent enemies today, at home and abroad, far more focused and determined to bring America down. As a result, America is extremely vulnerable today to three looming disaster scenarios.
First, our soaring national debt is not free. We have to pay interest on all those trillions in debt, every year. The Fed’s extremely loose, bordello-style monetary policy has kept interest rates at record low levels throughout the Obama Administration, with short-term rates near zero.
But that can’t and won’t continue. Accelerating inflation will itself push up interest rates, as investors demand a market real return in excess of inflation. When the Fed finally moves to counter inflation with a tight monetary policy, that will further sharply increase interest rates. The pressure of trillions in federal borrowing further contributes to rising rates, as does continuing economic recovery at home and abroad, though that may be less of a factor in America going forward.
With America’s national debt already over $10 trillion this year, and projected by CBO to grow to over $20 trillion by 2021, America is extremely vulnerable to soaring interest rates on that debt, which will produce soaring federal spending for debt interest, resulting in further soaring deficits and debt. Already, assuming only a modest rise in rates over the next 10 years, CBO projects that annual net federal interest spending on the national debt will soar from $214 billion this year to nearly a trillion by 2021. More rapidly rising rates could quite possibly result in federal spending, deficits and debt exploding out of control, beyond our capability to finance. The resulting financial chaos would further cripple our economy, making all the numbers much worse, indeed, completely intractable.
Secondly, with our deficit already at an all time world record by far of $1.645 trillion, what happens if we fall into another recession? How high will the deficit go then? Well over $2 trillion for sure. Will America even be able to borrow that much to keep the federal government functioning? That will be all the more dubious if the Fed has to stop printing money to buy so much of that debt. But if the Fed does not stop, how high will inflation go?
With soaring oil prices, regenerating inflation threatening to force the Fed into tight monetary policies, and all the Obama tax rate increases now scheduled for 2013, due to the expiration of the Bush tax cuts and Obamacare, another recession is frankly already on the horizon. That would likely leave America bankrupt just like Greece. The EU provided a trillion dollar bailout to back up Greece. But who would bailout America? Who even could?
Finally, these financial vulnerabilities leave America militarily vulnerable as well. America defeated Nazi Germany and Imperial Japan in World War II by running up the national debt to 109% of GDP. But CBO projects that on our current course the national debt will already be soaring close to 90% of GDP by 2021, exceeding the World War II historical record soon thereafter. With America already so deeply in debt, if we have to fight an extended, serious military conflict in the near future, beyond the limited actions we are already fighting, who will lend us the money to do it? China? Japan? The extra financial burden of military spending will cause federal deficits to soar further. If we have to borrow that much domestically, what will happen to our economy? Does this obvious financial weakness effectively invite war, if not directly against America, against our allies, from Israel to South Korea to Taiwan, even Japan?
Yet, at this moment, serious war drums are beating, even while our media and political establishments so thoroughly ignore them. President Obama got elected in part laughing over how he would solve the Iranian nuclear problem with his brilliant insight of just talking to Iran. Now in the third year of his Administration, none of that has amounted to anything. Obama said himself during the 2008 campaign that nuclear arms in the hands of such madmen would be “unacceptable,” but that just turned out to be more boob bait for bubbas, as so much else of Obama’s 2008 rhetoric.
Indeed, Mideast developments only further encourage the Iranian march to war. Regime change in Egypt has already allowed Iranian warships through the Suez Canal for the first time. Iranian infiltrators foment revolution among the Shiite majority in Bahrain, where the U.S. Navy maintains its top regional base. With the world distracted by Libya, Iran accelerates arming Hamas in Gaza and Hezbollah in Lebanon, both committed to mass murder of our Jewish allies in Israel.
What this all adds up to is that America faces an existential crisis today as grave as World War II, the Civil War, and, indeed, the original American Revolution itself. The year 2012 may well be the last chance to save our nation from ruin.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online