The Congressional Budget Office (CBO) recently changed its projection for fiscal year ending September 30 to show a deficit of $506 billion. Despite the national debt now being north of $17.6 TRILLION and having doubled since Obama took office, statist economists, columnists and apologists immediately praised the $506 billion number.
The LA Times; “. . . the federal deficit is set to decline for the fifth year in a row, and is much smaller than during the Great Recession, when revenues plummeted and federal spending was increased to stimulate the economy.” (Emphasis added; more on this below.)
The Seattle Times: “. . .the federal deficit is much smaller than those of recent years and is 2.9 percent of gross domestic product (GDP), down from a high of 10 percent of GDP in 2009 during the Great Recession.”
The Washington Times: “President Obama is poised to notch the lowest deficit of his six-year tenure at just more than a half-trillion dollars, reflecting slow but steady progress he and Congress have made on cutting annual spending.”
David Wessell, a contributing correspondent to The Wall Street Journal, even put up a goofy three-minute animated cartoon to “explain” why “The federal deficit is not a problem right now.”
Despite the now-proven failure of Keynesian economic policies, establishment economists continue to tout deficit spending as a way to stimulate economic activity. However, Frank Shostak, an adjunct scholar of the Mises Institute, recently penned “Why Isn’t Monetary Pumping Helping the Economy?,” which proves that the deficit spending since 2008 did not fillip the economy.
A graph of US economic activity from Shostak’s analysis:
Click on the link for Shostak’s piece. It easy reading. And, really significant is that he backs up his position with analyses of EU and Japanese spending.
Keynesian economics have for so long been accepted that few question its planks, especially that deficit spending boosts economic activity. Advocates of Austrian economic theory are the exceptions, but Austrians get next to no coverage in establishment publications and media outlets.
The CBO forecasts “persistent and growing deficits.” If there is not a major political upheaval, expect deficits for decades.
Statist economists see no dangers or deleterious effects of deficit spending. When the negative results of deficit spending appear, such as massive price inflation, stock market collapses and widespread bankruptcies, Keynesians simply proffer up still more excuses for failed Keynesianism.
In this climate, gold and silver remain solid investments, and with the current correction in precious metals prices having about run its course, we should see higher PM prices in the not too distant future.