China alarmed by US money printing [another slap to Obama] [ChiComs quoting Ben Franklin]

I think the next three years is going to be a wild time in the financial markets. Right now we’re in the calm before the storm. The latest 10-year budget outlook forecasts another $9 trillion in federal debt, and apparently that huge number is acceptable to the democrats. They have no plan to reduce that massive increase in debt through spending reductions or stronger economic growth. They have no intention of cutting entitlement spending, and incredibly, they even want to add on another big health care entitlement program when we can’t afford the entitlements programs we have now. It seems that some virus causing fiscal insanity has infected Washington, D.C. When I listen to democrat congressmen in their town hall meetings, they sound like car salesman or realtors who are good at dealing with people but they don’t know anything about economics. There’s a major shortage of economic knowledge in congress at this time.

At some point in a year or two, foreign governments and investors are going to lose even more confidence in the dollar and US treasury debt, if we don’t get our federal spending under control. So I’m expecting a decline in the dollar, a plunge in treasury bond prices, higher interest rates, and the spectacle of Geithner talking about his fantasies of America “living within our resource limits.” We’re heading for higher inflation for sure because the political process is broken and few candidates can campaign on responsible proposals for lower entitlement spending without being attacked by their opponent with deceptive campaign ads. There’s almost no responsible debate about entitlement spending anywhere in our political system. That only happens in the most conservative congressional districts.

After the remarkable 25-year run of strong economic growth, increasing entitlement spending, and low inflation ending in 2007, the American people believe entitlement spending can continue to grow forever without higher taxes and without a fiscal crisis, and that is a mistaken belief. Our country is older demographically than in the 90s and health care is more expensive now, so we will have to cut spending on health care (and useless federal bureaucracies) or raise taxes in the next decade either directly or through much higher inflation.

When companies move offshore, it’s because the grass is greener on the other side. So we should make our grass greener.

Yeah, sure.

Cut average compensation to 40 cents an hour.

Throw people out of their houses, make them live in squats and bathe in ditchwater. Let them drink from hoses.

Best of all, make them compete with prison labor gangs, just like America in the Good Old Days, when Mrs. Vanderbilt passed out sapphires and rubies in her dinner salads and soups, as party favors.

Milton Friedman said it, so I think there might be some merit to the idea, that without labor syndicalism in America, there would never have been either a mass middle class nor a consumer economy -- the literal envy of the human race.

......put a massive tarriff on foreign exports so that only crappy GM cars were affordable, would you clap and cheer?

We've seen this movie, or one very like it, at the end of the '70's.

To forestall U.S. tariffs being raised, Japanese car importers agreed to "voluntary import quotas". This voluntary restraint by the Japanese had a number of sequelae:

Japanese imports fell

Imported-car dealers responded to the constriction in earnings opportunity by hanging every dealer-installed option they could on the stock they had available, raising prices as far as possible

Japanese manufacturers began to plan for "assembly" (kit-assembly) plants in the U.S. that would a) leave most of the profits in Japan and b) meet congressional "content" guidelines

General Motors and other crappy-car makers promptly raised prices -- a lot. A Chevrolet Caprice that stickered, loaded, for $5600 in 1976 went for over $12,000 in the 1980's.

Pure genius.

Oh, and by the way -- with U.S. car production falling, the Japanese and other foreign mfrs will now re-think their U.S. assembly-plant complexes. Massive job losses could result if Nissan, Honda, VW, etc., repatriate production or move it to some sweatshop like Mexico. The parts manufacturers will follow.

Happy Labor Day.

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