Debt is not the Problem, It's the Answer!

Below is a quote from Jimmy Rogers, one of financial TV’s most famous talking heads. He was once partners with the extraordinary trader, George Soros. Mr. Rogers claims to have started with $600 and now is worth millions. The Quantum fund which they ran together appreciated 4200% during its 10 year existence, due mainly to Mr. Soros making some gigantic bets on foreign currency depreciation, the British £ in particular.


Monday January 14, 2013
Jim Rogers Doubts US jobs data
Jim Rogers : “I have learned not to take advice from the government, especially the US government, which frequently misleads its citizens, “Rogers said in a media briefing in Taipei. Rogers, who is based in Singapore after selling his New York apartment in 2007, said that even if the reported drop in the US’ unemployment rate is true, it has nothing to do with the US Federal Reserve’s third round of quantitative easing that was initiated last month. “Printing money has never worked [in stimulating economic recovery] throughout history,” he said. “Sometimes it worked in the short term, but it’s never worked in the medium or long term.” - in The Taipei Times


Rogers says, above “Printing money has never worked [in stimulating economic recovery] throughout history”, you want to know why? Because every government that tried it, long term, STOPPED the stimulus before it took effect. Governments stopped the stimulus because they were afraid, yes, AFRAID. They were afraid that the debt being created by the stimulus would bring on inflation and would become a burden to our children and grandchildren. The fear comes from politicians and economists that have no idea of what they are doing. Spouting theories that have never been proven and, by the way, never will be, because not only is their logic totally wrong, but the input to derive a theory is wrong. Jimmy Rogers has no idea of where he is leading the people who listen to him. Just look at his last illogical move; leaving New York City for Singapore. Moving from the greatest country in the world to a tiny dictatorship that tells its citizens what they can and can’t do with their lives. They still cane people there for expectorating on the sidewalk, and one can go to jail for the smallest offense against the state. He moved there with his children. Poor judgment and with no applicable logic, I feel sorry for his kids. He probably would have moved to Italy under Mussolini’s rule because the trains ran on time.


What is the right logic? They say that too much debt is a burden to future generation and will create high rates of inflation. That might be true in an overheated economy, but in our underutilized economy, the chances of that happening are zero and none. Look back to 1980, in Reagan’s first term; interest rates were 20%, the national debt was about $800 billion and inflation was 18%, what are the same figures today? Interest rates are ZERO, The national debt is $17 TRILLION, and believe or not inflation is about ONE %. So why worry about debt? When the economy is struggling to get footing, we should be increasing debt. This is the time to rebuild the infrastructure. Labor is cheap and money is cheap and the country would be making a long term investment. 30 year bonds are yielding under 3%. People would go back to work and maybe after a while wages would go up and the nation would rebuild its middleclass.


President Clinton showed us that any amount of debt can be paid off in good times. When the economy is running full blast and there is no more room for expansion; that’s when debt should be paid off! That’s when government programs are easily paid for, that was when Alan Greenspan was fearful that the entire U.S. debt would be paid off in 10 years and there wouldn’t be any need for the Federal Reserve, or his pontificating. The cure for the U.S. economy is more debt, using it to invest in America. Infrastructure! Our nation is the richest in the world, by a long shot. Our balance sheet is unparalleled, our assets are about $100 Trillion and our debt is only $17 Trillion and when we get back to full employment the money will be rolling into the government coffers, hand over fist - That’s the time to reduce the debt!


This is good old, do I dare say it, Keynesian economics. Borrow and invest in bad times, payoff and retrench in good times. That’s the way to save Capitalism, the middleclass and the American way of life. The government will automatically reduce its size in relation to the GDP (Gross Domestic Product). Government is there to help the economy grow. It is also there to put the brakes on when things get “Irrationally exuberant”. The country ran just fine between 1945 and 1970. There was intelligent regulation and the people had a say in where the country was going. We were the absolute envy of the world. Then Mr. Reagan came along and started deregulating, that was when greed got the upper hand. Wall Street and Industry went hand in hand down the primrose path to eventual ruin. We are still feeling the effects of deregulation, but little by little the people are fighting their way back to equality and justice. Conservatives and Republicans have this strange perception of the world. When the debt looks like it is going to fall, start wars and reduce taxes, Reagan did it , both Bush’s did it. When the debt that they created is high and has created hard times, the conservatives want to reduce government and taxes; the only stimulus to the economy. That’s illogical and a sure to bring our economy to its knees and be the final blow to capitalism.

That's how I see it. All comments are welcome